Trade Example – NZD/USD

Filed under: Learn Forex Trading |

There was a trade on the NZD/USD (the pair for the New Zealand dollar and the United States dollar) recently that I missed, and I would like to talk you through this setup right now.

 

Figure 1.

Figure 1.

 

To begin with, take a look at Figure 1. This is the daily chart for the NZD/USD pair. This is a fairly long-term view of the pair (3 months or so), and the reason I am showing you this is to draw attention to a long-term area of support/resistance (in the middle of the chart marked with a long horizontal green band). Price had previously been in something of a trading range before breaking out to the downside. It was then that I was looking out for any bearish price action signals on both the daily and intraday charts.

Figure 2.

Figure 2.

 

If you now look at Figure 2, you will see a close up of the daily chart on the NZD/USD pair. What you can see now is a nice bearish pin bar coming right off of our aforementioned level of support/resistance. I did think about putting an order in here at a 50% retracement of the pin bar, with a stop loss placed just a few pips above the high of the move, and a target of two times the risk. However, as it was such a long pin bar, it would have required a significant retracement, and I felt that the risk-reward scenario was not really worth it. Mainly though, I just felt that it wouldn’t retrace that far.

 

However, this order would have been filled, and it very much looks like a target of 1:2 would have been met by now. Therefore, this must go down as another opportunity missed. However, it does provide us with another great example of the benefits of price action trading in action.

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