Trade Setup – GBP/JPY

Filed under: Live Trades |

I currently have an order in place on the GBP/JPY forex currency pair, which for those of you that don’t know is the pair for the British pound and the Japanese yen. You can see the exact levels of this order on my published trading account at:

 

http://www.myfxbook.com/members/jjrgaskell/daily-trade/357261

 

Figure 1.

If you take a look at Figure 1, you will see an area of support/resistance marked with a green band. As you can see, this area held as resistance on no less than four separate occasions, before finally breaking through this level and moving up. The pair is now bullish, with the 8-day exponential moving average crossed above the 21-day exponential moving average. Price seemed to move very quickly up, perhaps too quickly, and has since retraced back down to the same area that had previously been acting as a resistance level. This resistance has now become a new support area.

 

Figure 2.

If you look at Figure 2, you will see a close up of the price action around this area. As you can see, price had been moving down until it hit this level of support/resistance, when it formed a bullish pin bar. Although this was a good sign, the pin bar was not quite strong enough for me to initiate a trade at this stage. However, when a bullish engulfing pattern formed straight after this, I put my order in to go long at a 50% retracement of the bullish candle, with a stop loss placed just a few pips below the low of the move, and a target of two times my risk. This is a slightly conservative target, as there is plenty of space for the trade to move into, and we could have gone for a risk-reward of 1:3 if we had been so inclined. However, with our bank increasing by 9% already this month, another 2% gain would cap that off nicely.

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