Trade Example – XAG/USD (Silver)

Filed under: Learn Forex Trading |

I have a trade example for you today on the XAG/USD pairing, which for those of you that don’t know is the rate for the commodity of silver. The gold and silver pairs are good pairs to trade and they provide some reliable setups, so it is well worth keeping these on your trading radar.

 

Figure 1.

If you take a look at Figure 1, you will see the daily chart for the XAG/USD pair. This will be the only chart that we look at during this example. Often, we use the daily chart just for levels of support and resistance, and to assess the direction of the current trend before moving down to the 4-hour or even 1-hour timeframe to find any price action signals. However, on this occasion, our price action signals comes on the daily chart as well.

 

I have highlighted the two candles that are of most interest to us on this chart. But before looking at that, we must assess the trend. As you can see, the chart visibly moves down from left to right, telling us that the trend is bearish. This is confirmed by the fact that the 8-day exponential moving average is crossed below the 21-day exponential moving average, and it has been for some time.

 

The highlighted candles are forming a pattern that is known as an ‘inside bar’ formation. This is when one candle has higher lows and lower highs than the previous candle. It tells us that price is consolidating and could break out at any moment. This would therefore have been a good time to put a short order in at the break of the low of the mother candles of the inside bar, with a stop loss just a few pips above the high of the mother candle and a target of two times our risk. As you can see, this trade would have been successful for a 2% rise on our bank. More tomorrow…

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