Trade Example – USD/JPY Bullish Pin Bar (50% retracement entry)

Filed under: Learn Forex Trading |

 

As you may have already guessed, I am focussing on rigorously testing my trading methods on the USD/JPY forex currency pair at present (the pair for the United States dollar and the Japanese yen). What I would like to show you today is a trade that I took on Forex Tester (www.forextester.com) around 2009, and this provides another good example of a bullish pin bar setup with a 50% retracement entry.

 

Figure 1.

Figure 1.

If you take a look at Figure 1, you will see the daily chart for the USD/JPY pair in 2009, which is the timeframe that I prefer to trade off. The pin bar in question is highlighted in green on the right hand side of the chart, which came at a significant area of support/resistance (marked with a horizontal red line). You will also see that the 8-day exponential moving average is crossing above the 21-day exponential moving average, suggesting the market is moving from bearish to bullish. It was here that I 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 with no target set at all – intending to manage the trade as it progressed.

 

Figure 2.

Figure 2.

This order was filled, and the price exploded higher before forming a bearish candle (see Figure 2). It was here that I moved my stop loss up to just below the low of the bearish candle, to lock in profits of just under four times the risk. This stop loss was then subsequently hit, and the trade was closed for some very nice profits. While price action signals give us a high probability entry, they do not give us price targets, and as such, it is better to either manage trades as they progress, or to set a target just before the next support/resistance area. Well, that’s it for today – more tomorrow.

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