Trade Example – NZD/USD

Filed under: Learn Forex Trading |

I have a trade example for you today on the NZD/USD forex currency pair, which is the pair for the New Zealand dollar and the United States dollar. To begin with, take a look at Figure 1.

 

Figure 1.

Figure 1 shows the daily chart for the NZD/USD pair. Although the short-term trend is up with the 8-day exponential moving average being crossed above the 21-day exponential moving average, price had reached a very strong area of support/resistance, marked in on the chart with a green band. It is better to think of support/resistance areas as ‘zones’ rather than a fixed level. This gives us a little bit of flexibility with our decisions, as the market is not quite so neat.

 

Figure 2.

If you now look at Figure 2, you will see the 4-hour chart for the same NZD/USD pair. I have highlighted a very long pin bar, which stuck out like a sore thumb on the chart. This bounced perfectly off of our aforementioned level of support/resistance, confirming the significance and strength of the level. This would have been a great time (had we spotted it!) 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 of two times our risk. Price very often retraces slightly before continuing, so this gives us a better price to get in at.

 

As you can see, this order would have been filled and our target would have been met for a very nice 2% rise on our bank. This was a very nice and obvious setup in the market, and if you had been checking your charts every 4-hours when new 4-hour candles are closed, then we would have been in on this setup.

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