Trade Example – XAG/USD (silver)

Filed under: Learn Forex Trading |

I have a very simple trade setup by way of a forex trade example for you today – but often, the simple ones are the very best setups.

 

Figure 1.

The trade comes on the XAG/USD pair, which is the pair for trading silver. If you look at Figure 1, you will see a section of the current daily chart. The pair has recently been very bullish, with the 8-day exponential moving average crossing well above the 21-day exponential moving average. If anything, these moving averages are actually moving wider apart, signalling that there is some considerable upward momentum with this pair.

 

The candles that we are most interested in on this chart are the ones that I have highlighted in green. This is what we call an ‘inside bar’ setup. This is when one candle is fully engulfed by the preceding candle, with the high of the preceding candle (the mother candle) being higher than the second candle (the inside bar), and the low of the mother candle being lower than the inside bar. In this particular inside bar, the second candle was also a pin bar, which also shows that lower prices are being rejected. We could have take a long trade here by putting an order in to go long at the break of the high of the mother candle, with a stop loss placed a few pips below the low of the mother candle, and a target of perhaps two and a half times our risk.

 

As you can see, this trade would have been successful (had I taken it!) for a very nice 2.5% rise on the bank. In this kind of powerful, bullish market, it makes sense to go with that momentum and try to hop on and take a ride. Inside bars tell us when the market is taking a breather, which 

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