Trade Example – NZD/USD

Filed under: Learn Forex Trading |

I had a few orders in last night that never got filled, and the market has subsequently moved in the direction anticipated – so I have had to close all of these orders. There was one opportunity that I didn’t take on the NZD/USD (the pair for the New Zealand dollar and the United States dollar) a couple of days ago, so I will talk you through this trade setup right now.

 

Figure 1.

If you take a look at Figure 1, you will see the daily chart for the NZD/USD forex currency pair. This is the only chart that we will need to look at for this setup, and we will not require the intraday charts for this one. I have highlighted the candle that we are most interested in on this chart. It is a bearish pin bar that formed a couple of days ago.

 

This candle is of interest for several reasons. Firstly, the 8-day exponential moving average has just crossed below the 21-day exponential moving average, signalling that the momentum of the market has gone from bullish to bearish. And there is also a very significant level of support/resistance that this pin bar has penetrated (which is highlighted with a horizontal green band).

 

What we could have done at the close of the bearish pin bar was to put an order in to go short 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 two times our risk. Another option, which is something I have been doing recently, would have been to take 70% of the profits at one times our risk, and let the other 30% run to the target or stop loss. Had we put this order in, it would have reached the target in the space of just a few hours, and we would have made a 2% or a 1.3% rise on the bank, depending on whether we had took profits at the 1R level.

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