Trade Example – GBP/JPY

Filed under: Learn Forex Trading |

There was a possible setup on the GBP/JPY pair last night (the pair for the British pound and the Japanese yen), and I would like to briefly talk you through the ins and outs of this setup right now.

 

Figure 1.

Figure 1.

If you take a look at Figure 1, you will see the daily chart for the GBP/JPY pair. The daily timeframe is my favourite timeframe to trade off of because the levels of support/resistance seem to hold more weight, and the spread has less of an impact on your profit/loss figures (due to stop losses and targets being relatively further away).

 

The crucial bar in this setup is the highlighted bearish pin bar, which came at a very important area of support/resistance (which is marked with a horizontal red line on the chart). What you could have done at the close of the pin bar was to put an order in at a 50% retracement of the pin bar, with a stop loss placed just a few pips above the high of the pin bar, and a target set of at least two times the risk. Had you done this, the order would have been filled, and you would now be in profits of around that equal to the original risk. However, as there is currently a long tail on today’s candle, it might be prudent, if you have entered this trade, to move the stop loss to breakeven at this point to protect your capital – and effectively be in a risk-free trade. It is always good to be a risk-free trade, because you can let profits run and keep moving the stop loss up to lock in some profits as you go. This is one that I would normally take, but unfortunately, I had a little trouble with my VPS last night, and as such, I wasn’t able to put this order in. We will see how this one pans out in the coming days.

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