Trade Example – XAG/USD (silver)

Filed under: Learn Forex Trading |

 

There is just one possible setup (in my view) currently available of the forex pairs at the moment, and this comes on the XAG/USD currency pair (the pair between silver and the United States dollar). I have decided not to take this setup, and I would like to talk you through this setup and why I am not taking it right now.

 

Figure 1.

Figure 1.

To begin with, take a look at Figure 1. This is the weekly chart for the XAG/USD pair. I am showing you this so that you can see the levels of support/resistance, and a 61% Fibonacci retracement area. This provides us with a good, confluent level to trade off.

 

Figure 2.

Figure 2.

Now, if you look at Figure 2, you will see the daily chart for the same XAG/USD pair. What you can see here is that price has hesitated at our area of support/resistance, before forming a very large pin bar. What we could do here 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 our risk.

 

However, you might notice that the 8-day exponential moving average is crossed well below the 21-day exponential moving average on the daily chart, and that the chart is visibly moving down from left to right. All of this tells us that this pair is currently in a downtrend with a lot of bearish momentum. As such, as we are better advised not to go against the current trend and momentum, I decided not to take this trade and to instead wait for a better opportunity. Whether this turns out to be the right decision or not, remains to be seen…

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