Trade Example – USD/CHF

Filed under: Learn Forex Trading |

I have a very simple trade example of one that I didn’t take today – but it is worth going through it anyway as it was a decent and elementary setup.

 

Figure 1.

Figure 1.

If you take a look at Figure 1, you will see the daily chart for the USD/CHF forex currency pair, which is the pair for the United States dollar and the Swiss Franc. This is the only timeframe that we will need to look at for this particular setup. What you can see here is that the 8-day exponential moving average is crossed well below the 21-day exponential moving average, signalling that the pair is very bearish. This can easily be confirmed with a brief visual inspection, and it is very obvious that the chart is moving down from left to right.

 

What has happened recently is that price made a slight retracement, and this area could have been seen as a minor area of support/resistance (marked in on the chart with the smaller horizontal green band). Therefore, when price formed a very nice pin bar at this level, a speculative order could have been put in at a 50% retracement of this pin bar, with a stop loss placed just a few pips above the high of the pin bar, and a target set of two times the risk. If this order had been placed, then the target would have been reached for a very nice 2% rise on the bank. However, I felt that this trade would have been a little speculative in nature, as the area of support/resistance was a minor one, and there were no other real confluent signals other than the bearish trend. Therefore, despite missing a winning trade, I do feel that the right trading decision was made on this occasion.

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