Trade Example – NZD/USD

Filed under: Learn Forex Trading |

There have been some interesting developments on the NZD/USD forex currency pair of late. I would like to provide a commentary on these events today, and explain some of the trade setups that we have been taking in our lives trades.

 

Figure 1.

To begin with, take a look at Figure 1. This is a six-month view of the daily chart on the NZD/USD pair. What you can see by looking at this chart is that there was a very strong area of support/resistance in the middle of the chart. It just jumps out at you. It was the bottom end of a really tight and neat trading range in March to May of 2012. Price has since moved back up to this level. At the beginning of July, there were several pin bars that toyed with this level, before moving back down again. And now, yet again, price is challenging this level.

 

Figure 2.

If you look at Figure 2, you will see a closer view of the daily chart for the NZD/USD pair. As you can see, there has been three successive pin bars, knocking on the door as it were (how many times do you knock on a door before giving up?). We took a trade on the second pin bar and got stopped out after an even bigger pin bar. We are currently having a second stab at this, taking a trade on a 50% retracement of the third pin bar. The only negative to this setup is that the current momentum is bullish, so it is a contrarian trade going against the mid-term momentum. However, the level of support/resistance, and the fact that we have had three pin bars in a row, all point to the fact that this level is holding – in which case, there is a high probability that price will take a breather and move back down. We will wait and see…


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Your email address will not be published.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>