Trade Example – USD/JPY

Filed under: Learn Forex Trading |

I have a trade example for you today on the USD/JPY forex currency pair (the pair for the United States dollar and the Japanese yen), and this is an example of how to trade a breakout at the beginning of a new trend.

 

Figure 1,

Figure 1,

If you take a look at Figure 1, you will see the daily chart for the USD/JPY pair and the trade in question. What you can see is that the 8-day exponential moving average had recently crossed above the 21-day exponential moving average, signalling that a change in market sentiment from bearish to bullish had occurred.

 

Now there are too ways in which you could have traded this setup, and I took the more conservative approach, which resulted in a breakeven trade. However, it could also have easily been profitable. First, here is what I did. I put an order in to go long at the break of the high of this move, which also happened to be the high of the mother candle of an inside bar pattern containing no less than four candles. However, for my stop loss, I placed it just below the low of the pin bar contained within this mother candle, to create a tighter stop loss.

 

Figure 2,

Figure 2,

The order was filled, and the market did move up a little bit. I moved my stop to breakeven to protect these profits, but if you look at Figure 2, you will see that this stop loss was subsequently hit. Another way that this trade could have been made might have been to put an order in to go long at a 50% retracement of the bullish pin bar. If you had done this, you could have made profits of three times the risk, or moved your stop loss up to the low of each completed candle, which would also have given you around two times the risk. However, I took this more conservative approach, and this led to a breakeven trade – which is never a bad result. More tomorrow…

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