Trade Example – GBP/JPY

Filed under: Learn Forex Trading |

There was a nice trade setup that occurred on the GBP/JPY last week, which I didn’t take as I already had a trade on a Japanese yen pairing (the GBP/JPY is the pairing for the Great British pound and the Japanese yen). So today, I would like to take you through this setup and explain how you could have been profitable with it.

 

Figure 1.

To begin with, take a look at Figure 1, which is the daily chart for the GBP/JPY pair. This chart shows price action on a daily basis, so each of the candles represents one day’s worth of price movement between the British pound and the Japanese yen. Now often, we use the lower time frames to tweak our entries, but on this occasion, we will only be using the daily chart as all the information that we need it found here.

 

The candle that we are most interested in here is the one that I have highlighted in yellow. As you can see, it is a very nice pin bar with a long tail, which is a very bullish signal because it means that price moved all the way down, and then all the way back up all in the space of one day. This shows that a price level has been rejected, and that the bulls have wrestled control.

 

An inspection of the chart shows that the overall trend is also up, with the chart moving up from left to right and the 8-day EMA above the 21-day EMA. At the close of the pin bar, if we had put an order in at a 50% retracement of this pin bar, with a stop loss just below the low of the move and a target of two times our risk, this trade would have been successful.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>