Trade Example – GBP/JPY

Filed under: Learn Forex Trading |

I’d like to show you a trade example today on the GBP/JPY forex currency pair (the pair for the British pound and the Japanese yen), which dates back to the beginning of the millennium. This is a trade I made on Forex Tester (www.forextester.com), and it just goes to show that these trade setups that we teach have stood the test of time.

 

Figure 1.

Figure 1.

If you take a look at Figure 1, you will see the trade setup in question. This is the daily chart for the GBP/JPY pair, and it is the only timeframe that we will need to use. What you can see at the bottom of the chart is that there is a resistance level which price stalls at. If you look at the highlighted green box, you will see that this level was respected, and a bullish engulfing pattern formed. This candle was also formed on a Monday, and you can see that the open was slightly below the close of Friday’s session. So the market had opened bearish, and then reversed the sentiment during the day. What I did here was to put an order in to go long at the break of the high of the bullish candle, with a stop loss placed just a few pips below the low of the move. My target level was at the next support/resistance level, which gave us a risk-reward of around 1:2.

 

As you can see, this order was filled, and price began to move up. I kept moving my stop loss up on this one to the lowest low of the previous three candles, and this kept me in the trade. After taking profits at the next support/resistance level, price then formed a very strong bearish engulfing pattern, so it proved to be the right place to exit the market.

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