Trade Example – GBP/JPY

Filed under: Learn Forex Trading |

 

Just to show you that not every trade setup works out (in fact, about 50% of our trades are expected to fail based on a risk-reward ratio of 1:2), I am today going to show you a trade example today of one that wouldn’t have worked out.

 

Figure 1.

If we begin by looking at Figure 1, you will see the daily chart for the GBP/JPY forex currency pair, which is the exchange rate between the British pound and the Japanese yen. As you can see, there is no obvious trend with this pair at present, and if anything, the pair is moving in a sideways trend and is struck in a trading range. I have, however, marked in some significant areas of support and resistance – and these are the areas that are holding the pair within this trading range.

 

Figure 2.

If you now look at Figure 2, you will see the 4-hour chart for the same GBP/JPY currency pair. I have highlighted a pin bar in green (this is the first pin bar, not the current one that is forming) at a significant area of support/resistance at the bottom of the aforementioned trading range. This might have been a good place to put an order in at a 50% retracement of the pin bar, with a stop loss just a few pips below the low of the move, and a target of two times our risk. This order would have been filled, and although price did move up after this, our target would not have been met, despite coming within just a few pips of our target. We would have ultimately taken a loss of 1% on our trading bank. However, price is currently forming another pin bar at the lower end of this trading range – so this is one to watch out for; and it might well prove to yield a better result than the first one.

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