XAG/USD (Silver) Breakout Strategy

Filed under: Learn Forex Trading |

The XAG/USD forex pair (the pair for silver) has made a very bearish move recently, and everyone who did not get in on this bearish move will now be kicking themselves. If you take a look at Figure 1, you will see the move that I am talking about.

 

Figure 1.

Figure 1.

The horizontal green band that you can see on this chart is an area of support/resistance that I have drawn in. This was an area that has been extremely relevant over many, many months, and until this latest bearish move, price had previously been unable to close through this area. Therefore, once price did finally close through this area with a long bearish candle, this could be seen as a very bearish move. The right move here would have been to put an order in to go short just a few pips below the low of the bearish candle, and with a stop loss just a few pips above the bearish candle. I would not set a target in this kind of setup, and let price action guide us on when to exit the trade.

 

Another very long bearish candle followed this, which would have filled this order. Then, a bullish candle formed with a long tail and long upper shadow. At this point, I would have moved my stop to just a few pips above the high of this bullish candle. Thus, if there is more bearish momentum to come, we will stay in the trade – and if a retracement is on the cards, then our stop loss will take us out of the market. As it is, an inside bar has formed, telling us that the market is indeed consolidating and taking a breather. Which way price will move at this point is anyone’s guess, but the odds are still in favour of bearish price action rather than any bullish movement.

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