Trade Example – XAG/USD (Silver)

Filed under: Learn Forex Trading |

I just want to follow up on a trade setup that we talked about last week, as it is a particularly interesting one. Figure 1 shows this setup once again, and the outcome. Trendlines are not something that I normally use too much or put much stock in, but on this occasion, the trendlines seemed really well-defined and obvious, and that is very much what we want – for as many people to see them as possible.

 

Figure 1.

Figure 1.

I had put an order in to go short when a bearish pin bar formed at the upper trendline. I entered this short trade at a 50% retracement of the pin bar, with a stop loss placed just a few pips above the high of the move, and a target set of two and a half times the risk. When the trade moved into our favour and got to around a profit of two times our risk, I moved the stop loss to breakeven. However, some aggressive volatility on the 1-hour timeframe took us out of this trade at breakeven. However, had we not moved this stop loss, we would now be sitting on a 2.5% rise on the bank.

 

Price has since moved down, and we could in fact have had profits (so far) of around four times the risk, and it is still looking very bearish. Price now seems to have well broken out of this trading range within the trendlines. However, there is another level of support/resistance now coming into play, and this really negates any opportunity in trading the breakout. What I would be looking for now is a pullback towards this support/resistance zone, and a bearish price action signal to confirm this bearish momentum. That’s all that I have for you today – and I’ll be back with yet more forex price action trade examples tomorrow.

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