Trade Example – USD/CHF

Filed under: Learn Forex Trading |

I have a trade example for you today on the USD/CHF forex currency pair, and this is a setup that is a little bit different and more complex, and something that I might look out for in the future – as it seems to provide a particularly high probability setup.

 

FIgure 1.

FIgure 1.

To begin with, take a good look at Figure 1. This is the daily chart for the USD/CHF pair (the pair for the United States dollar and the Swiss franc). The pair had been moving up, with the 8-day EMA crossed above the 21-day EMA. However, at the top of the chart, price had been approaching a level of support/resistance (marked with a thin red horizontal line), and as such, I should have been watching this level for any bearish price action signals.

 

At the bottom of this chart, you will also see the RSI indicator. Now, I don’t really like using indicators, but this momentum indicator can be particularly useful. What you can see, is that as the RSI indicator is showing a fall in momentum, price is continuing to move up. This is what is known as a divergence, and it tips us off to the fact that the market may be about to turn.

 

Figure 2.

Figure 2.

If you now look at Figure 2, you will see the 4-hour chart for the same USD/CHF pair. What you can see here is a final confirmation of this turn, with a nice long bearish pin bar. At the close of this pin bar, we could have gone short at the low of the 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 we had done this, we would now be sitting on a very nice 2% rise on the bank.

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