Trade Example – GBP/JPY

Filed under: Learn Forex Trading |

I have a trade example for you today on the GBP/JPY forex currency pair (the pair for the British pound and the Japanese yen), and I would like to begin discussing this setup right now…

 

Figure 1.

Figure 1.

 

To begin with, take a good look at Figure 1. This trade was taken on forex tester, and set up over a decade ago, but the setup is just as relevant today, so we can learn from such examples. This is a breakout trade, and I will now talk you through how I play such trades like this one.

 

What you can see in Figure 1 is that there was an area of resistance (marked with a horizontal red line) that price had struggled to close above. What we are waiting for in an instance like this is a price action signal to tell us how the market is going to deal with this level once it begins to approach it again. A bearish pin bar or bearish engulfing pattern would tell us that the level is being respected again, and that we might expect price to move back down. However, a bullish breakout occurred, with a simple and long bullish candle, which closed well above this level. It was here that I put an order in to go long at the break of the high of this bullish candle, with a stop loss placed just a few pips below the low of the bullish candle, and no target set at all – intending to manage the trade.

 

What I did to manage this trade was to keep moving the stop loss up to the low of the last three candles. This strategy kept me in the trade for quite a while and a bullish trend formed. Eventually, the stop loss was hit for a profit of over two times the risk.

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