Trade Example – USD/JPY

Filed under: Learn Forex Trading |

I have a trade example for you today on the USD/JPY pair (the pair for the United States dollar and the Japanese yen), and there are numerous things to discuss. To begin with, as always, take a look at Figure 1.

 

Figure 1.

Figure 1.

Figure 1 is the daily chart for the USD/JPY pair, and it is the only chart that we will need to look at on this particular occasion as all of the information that we need is contained in this chart.

 

What you can see is that the 8-day exponential moving average is crossed above the 21-day exponential moving average, and if you look back further on the chart, you will see that it has been for some time and that this market is in an extremely powerful bull trend. In this kind of potent trend, it is better to only take trades on the long side, and to wait for any pullbacks into areas of support and look out for bullish price action signals.

 

Thus, when price recently pulled back to the most recent area of support/resistance (marked with a green band) and formed a bullish pin bar, what we could have done is to 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 set of two times the risk. Had we done this, then our target would have been met.

 

However, I did not put this order in. Why? I’m not quite sure. I certainly thought about it. My gut told me that another second pin bar was about to form. This is probably a result of just having two bad losing trades, and feeling that I was overtrading. Normally, as all of the usual criteria were met, I think I would normally have taken this trade setup for sure. The only saving grace is that perhaps the order would not have been filled; depending on how large the spread was at the time. That’s it for today – more tomorrow…

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>