Trade Example Update – USD/JPY

Filed under: Learn Forex Trading |

I just want to update you a little on a possible trade that I mentioned on the USD/JPY pair (the pair for the United States dollar and the Japanese yen) recently. This pair continues to have a lot of bullish momentum, and any trades at the moment as such need to really be on the long side. Although we have already had a couple of successful long trades on this pair recently and have ridden some of that bullish momentum, we did miss out on one recently that is proving to be a big miss.

 

Figure 1.

Figure 1.

Figure 1 shows the setup in question, and it was a fairly obvious one. The pin bar on the furthest right hand side of the chart is the one that we are talking about. It came at an area of previous resistance, which then became a new support level in the market. These levels had been very reliable in the recent past, so we should really have been on this one. Having just had three losing trades on the intraday charts, my confidence was slightly shaken and in the end, I shied away from this one. However, as we can see, those who went long here would now be rubbing their hands with glee.

 

There are two possible ways that we could have entered this trade. First, we could have put an order in to go long at a 50% retracement of the pin bar (as I discussed a few days ago). But another option, as the pin bar was quite short, could have been to go long at the break of the high of the pin bar. The benefit of this kind of order is that we are waiting for some bullish confirmation, rather than risking a pullback and hoping that the support/resistance level holds.  Often, waiting for a bullish breakout does not leave a very good risk-reward ratio, but on this occasion, as the pin bar was small, a nice risk-reward of at least 1:2 could still have been achieved.

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