Trade Example – GBP/USD

Filed under: Learn Forex Trading |

We currently have two live trades still in play. The one on the AUD/JPY pair has locked in some profits, and the other one is currently carrying a slight loss. However, due to a lack of final results on these trades, I will again take you through a trade that we missed.

 

Figure 1.

If you take a look at Figure 1, you will see the daily chart for the GBP/USD forex currency pair. Although the pair has been quite choppy recently, the chart is moving roughly up from left to right, and the 8-day EMA is crossed above the 21-day EMA, showing that the pair is in a bull trend. In a bull trend, it is best to only think about taking trades in the direction of that trend. So what we are doing is looking for long trades on any pullbacks.

 

Figure 2.

Figure 2 shows the 1-hour chart for the same GBP/USD pair. You will notice a very pronounced pin bar (which I have highlighted in yellow), which sticks out like a sore thumb on the chart. Generally, anything that catches your attention like this needs to be considered as a valid price action setup. It also came at a previous area of resistance on the daily chart, which then became support in a change of polarity. We could have taken a long trade here at the break of the high of the pin bar, with a stop loss placed just a few pips below the low of the pin bar, and a target of three times our risk.

 

Figure 3.

Figure 3 shows that this trade would have been successful, and our target would have been met. However, if we had used a trailing stop of one times our risk as we have been doing, our trailing stop would have been hit for around a profit of two times our risk. That’s it for today – more next week.

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