Trade Example – GBP/USD

Filed under: Learn Forex Trading |

There was a nice trade setup on the GBP/USD forex currency pair on Friday that I missed. I did initially have an order in for this setup, but in the end, I removed it as it was Friday and it seemed like the opportunity had already been missed. I will talk you through this nice looking price action setup right now.

Figure 1.

 

To begin with, take a look at Figure 1. This is the daily chart for the GBP/USD pair. What you can see here is that recently, there has been a change of market sentiment. The 8-day exponential moving average has crossed above the 21-day exponential moving average, signalling that the market has moved from bearish to bullish. I have also marked in a significant level of support/resistance (marked with a horizontal green band) that price has recently broken through. When price broke through this level and formed a bullish pin bar that penetrated our level of support/resistance, it was a good opportunity to place an order to go long at a 50% retracement of the pin bar; with a stop loss placed just a few pips below the low of the pin bar, and a target set of two times our risk (or you could split your target like I have been doing recently and take some profits at the 1:1 risk-reward level).

 

As you can see, the order would have been filled after two days, and price has since moved up to beyond what would have been our target level of two times the risk. Unfortunately, I did not stick with this order for long enough, as I felt that the opportunity had already passed. Therefore, in future, I will leave all orders in for at least the close of two more candlesticks on any time frame (unless of course something very unusual or volatile happens in the market).

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