Trade Example – GBP/CHF

Filed under: Learn Forex Trading |

I have a trade example for you today on the GBP/CHF forex currency pair. For those of you that are not familiar with these pairs, this is the exchange rate between the Great British pound and the Swiss franc.

 

Figure 1.

To begin with, take a look at Figure 1. This is the daily chart for the GBP/CHF pair and it is the only timeframe that we will be looking at for this price action setup. Sometimes, we look at the weekly chart for the long-term trend or even some price action setups. And very often, we look at the 4-hour and 1-hour charts to time our entries. However, on this occasion, we have all the information that we require in this daily chart.

 

To begin with, we always have to assess the trend. In this case, this task is quite easy. We can see that the chart moves up from left to right, and this tells us that the pair is in a bull trend. We can confirm this, if we need any confirmation, by looking at the exponential moving averages. The 8-day exponential moving average is crossed firmly above the 21-day exponential moving average and it has been for some time. Price has also rarely penetrated the 8-day exponential moving average during this time, so we can be satisfied that the market has a lot of bullish momentum.

 

I have highlighted the candle that we are most interested in. This is a well-defined pin bar that penetrated the 8-day exponential moving average and rejected it. If we had put an order in at a 50% retracement of the pin bar, this order would have eventually been filled with another pin bar forming. Our stop loss should have been a few pips below the low of the first pin bar, with a target of two times our risk. As you can see, this trade would have been successful for a 2% rise on our bank.

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