Trade Example – USD/JPY

Filed under: Learn Forex Trading |

I have a trade example for you today on the USD/JPY forex currency pair, which is the exchange rate between the United States dollar and the Japanese yen. This is a set up that I saw unfolding live and thought about taking, but in the end I decided against it for reasons that I will explain later in the article.

 

Figure 1.

To begin with, let’s take a look at the setup. Figure 1 shows the daily chart for the USD/JPY pair. The candle that we are interested in here is the second highlighted candle. This was a short little pin bar that formed at a decent area of support/resistance. It is also in line with the current dominant trend, which is bearish. We can see that the trend is bearish because the chart visibly moves down from left to right. There is also added confirmation by the fact that the 8-day exponential moving average is crossed firmly below the 21-day exponential moving average, and it has been for some time.

 

We could have gone short at the break of the pin bar, with a stop loss a few pips above the high of the move, and a target of three times our risk. This would have resulted in a very quick 3% rise on our bank. However, I did not take the trade because I felt that the pin bar was a little short and it also closed above where it opened.

 

Figure 2.

If you look at Figure 2, you will see that another good setup formed at the same area on the 4-hour chart. This time, there were two inside bar candles followed by a pin bar that faked a break to the upside before reversing back down. The low of this short pin bar would also have been a good entry, with a three or four to one risk-reward. However, this one was not to be, and we can only learn from it.

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