Trade Example – XAG/USD (Update)

Filed under: Learn Forex Trading |

I talked yesterday about a triangle currently setting up on the XAG/USD pair (the pair for silver), and I would like to update you a little bit on what has happened overnight.

 

Figure 1.

Figure 1.

Take a look at Figure 1. This is once again the daily chart for the XAG/USD pair. What I talk about yesterday was how price was being squeezed in this triangle formation, and how price was likely to explode out of this range one way or the other in the next session – and this is exactly what has happened. However, despite slightly anticipating a bearish rather than a bullish move, the pair has broken to the upside with a nice, long, bullish candle. This pair might now continue to move up to the previous level of support/resistance, where we could look for some more bearish price action signals (as this is a very strong level in the market).

 

Long trades could have been initiated at the break of the high of the mother candle of the triangle, which also happened to be the mother candle of six inside bars – which is also a very strong consolidation pattern. However, this would only provide a risk-reward scenario of 1:1.5 before the aforementioned support/resistance zone comes in to play – which for me is not quite enough, as I like a minimum risk-reward scenario of 1:2. However, some traders might well be able to get some profits out of this one if they manage the trade well.

 

It is also possible of course that this might prove to be a false break, and that price could continue to fall after this. Price action only tells us the likelihood of a turn in the market unfortunately, and it does not give us price targets. Therefore, trade management is key to any success in the forex markets.

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