Trade Example – USD/JPY

Filed under: Learn Forex Trading |

There was a trade setup that we didn’t take recently on the USD/JPY forex currency pair (the pair for the United States dollar and the Japanese yen), and I would like to talk you through this setup right now.

 

Figure 1.

To begin with, take a good look at Figure 1, which is the daily chart for the USD/JPY pair. At the top of the chart, I have marked in a thin red horizontal line, which marks a good level of support/resistance that was respected in the past. As this was a number of weeks and even months ago, you cannot see why this level is important on this chart, but if you scroll back on your chart you will see what I am talking about. The level was respect on three different occasions in both bullish and bearish scenarios. My only problem with it was that some validity was lost with this level as it was so far in the past and thus it may have lost some if its strength.

 

A very nice bullish pin bar formed right at this level, and it was here that we could have put an order in to go long at a 50% retracement of the pin bar, with a stop loss placed just a few pips below the low of the pin bar, and a target of at least two times the risk. Had we put this order in, it would likely have been filled and a target of two times our risk would already have been achieved for a very nice 2% rise on the bank. Unfortunately, I did not feel that the level of support/resistance was strong enough due to it not being a recent level, and as such I stood aside on this trade. However, momentum was very strong, and as such, a pin bar coming off of the 8-day EMA may have been good enough.

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