Trade Example – USD/CHF

Filed under: Learn Forex Trading |

I have a trade example for you on the USD/CHF forex currency pair today, which is a pair that we have not looked at for a while. This is the exchange rate between the US dollar and the Swiss franc.


FIgure 1.

If you look at Figure 1, you will see the daily chart for the USD/CHF pair. What you can see is that the pair recently gained some considerable bearish momentum. The 8-day exponential moving average crossed below the 21-day exponential moving average, and there are no signs of it crossing back any time soon. In this kind of market, we should only really be looking to hop on to this strong trend and try to ride some profits from it. Any trade against this momentum is a dangerous one, and as such, it is better, certainly for beginners, to stay away from any long trades here for a while.


Figure 2.

Figure 2 shows the 4-hour chart for the same USD/CHF pair. What you can see here is that an intraday level of support/resistance formed, before clearly being broken in the direction of the trend with another bearish candle (see the candle highlighted in green). What we could have done here is to try to hop on to the prevailing trend by putting an order in to go short at a 50% retracement of the bearish candle, with a stop loss placed just a few pips above the high of the bearish candle, and a target of two times our risk.


As you can see, our order would have been filled and our target would have been met for a very nice 2% rise on our bank. Unfortunately, I was put off this trade by the long lower shadow on the bearish candle in question, which put into doubt that the bears were completely in control. More tomorrow…

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