Trade Example (update) – AUD/USD

Filed under: Learn Forex Trading |

Screen shot 2013-02-21 at 09.59.09A couple of days ago, I talked about a possible trade setup on the AUD/USD pair, and I am still smarting about closing my order. The trade in question can be seen in Figure 1. This is the 4-hour chart for the AUD/USD pair. At the top of this chart, there is a horizontal green band, which represents a really good area of support/resistance on the daily chart. The daily chart had been moving down nicely with some good bearish momentum, so I was on the lookout for any bearish price action signals at this level to tip us off that the bearish momentum might once again be starting up. So, when the pin bar formed right at this level, I 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 massive risk-reward target set of six times the risk.

 

Figure 1.

Figure 1.

Price came within one pip (!) of filling my order before moving down with the next candle. I was about to go to bed, and I checked to see if the order had been filled (oh how I regret that!). It hadn’t, and at the time of viewing, the next candle had moved down considerably, so I cancelled the order. Price then moved up overnight, and my order would have been filled after all. The support/resistance level (and previous stop loss level) held, and then price plummeted past my previous target of six times the risk. This moved down with such force, that I probably would have moved my stop loss down into profits and let my target run to the next logical level. This has since moved down further, and a massive risk-reward of 1:10 could have been achieved! If only I had not cancelled that order… If only…

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