Trade Example – GBP/CAD

Filed under: Learn Forex Trading |

As I have no trade updates and results to give you today for the live trades, I am instead going to run through a trade example of a trade I missed on the GBP/CAD forex currency pair.

 

Figure 1.

To begin with, take a look at Figure 1. What you will see here is the daily chart for the GBP/CAD pair. As you can see, the trend is down – and we know this because the chart moves down from left to right, and our long term moving averages (1 month and 6 months) have crossed over to confirm the bearish momentum. Any trades we take have a better chance, statistically speaking, if we trade in the direction of the major trend, so this is what we want to do.  You will also see that there is a very clear area of support/resistance at the bottom of the chart, which is an area that I have marked in as usual with a green band. These are areas that I keep an eye on for any price action signals. Price moved through this area and then retraced back up to it, and this is a potential change in polarity.

Figure 2.

Figure 2 shows that a nice bearish engulfing pattern formed at the level in question. This would have been a great area to set an order at a 50% retracement of the bearish candle, with a target of at least two times our risk and a stop loss just a few pips above the high of the move. Figure 3 shows that our order would have been filled, and that our stop loss would have been toyed with but not hit, before price moved back down. This is a great example of the kind of trades that we are looking for with the live trades, and it is one that we sadly missed out on; but in a 24-hour market – you simple cannot catch them all!

Figure 3.

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