Live Forex Trade 1

This live trade example is going to be used in demonstrating how a typical forex trade can be taken in the market after performing some trade analysis.

The trade example is from an account which has a deposit of $5000 into a forex trading account, and the trade was placed with a lot size of 0.1 lots, equivalent to $10,000 trade size. The account is set to a leverage of 200:1 Leverage. This translates to the trader being required to maintain at least $25 in Margin (= $5,000 x 0.5%).

Trade Analysis

Take a look at the snapshot below:

live forex trade 1

Here we can see that there is a clearly defined resistance which has prevented the price action from breaking above a particular price level. There is a confirmation that has been obtained from the Stochastics oscillator, in which the lines have crossed at an overbought level. The trader therefore expects that the asset being traded is going to head downwards.

The trader then decides to place a trade as follows:

  • Order Type: Market Sell
  • Lot Size: 0.1
  • Entry Price: 5814.5 (resistance point)
  • Take Profit: 5465.0 (support at lower Bollinger band)

The rationale for entry and exit points as depicted in our earlier articles on how to set entry and exit points are as follows:

a)    For the entry level, we have already identified that the best short trade entries are made as close to the resistance as possible. In this example, there was a bullish candle which actually broke above the resistance line, but could not break below it. the decision was made to allow the candle to close so as to know if it would close above the resistance or below it. The candle eventually closed below the resistance, confirming that the breakout did not happen. If it had closed above the resistance, then it would have been a different ball game entirely.

b)    The entry confirmation was provided by the Stochastics oscillator, which crossed at 85, well into overbought territory.

c)     For the exit, the nearest support level should be the lower Bollinger band, which is the area where the candlesticks seem to bounce off from. However, because there is an intervening middle Bollinger band, the middle band should be the first target for the short trade and the lower Bollinger band used as the 2nd target.

The trade was executed and the midpoint of the trade is seen in this snapshot below:

live forex trade 2

The trade went into positive territory pretty quickly and eventually ended in profit.

Key Points

The following are the key points that traders must note for setting successful trades.

a)    The first step is to always scour the markets for trading opportunities. If you see price action close to a resistance, it represents an opportunity to sell. If price is at a support, then this is an opportunity to buy. However, the trader must watch to see if there will be a break of the key level, which will negate the signal when it occurs. If not, then a confirmation to sell off the resistance or buy on the support must be sought.

b)    Once a trade opportunity has been defined, the trader must use the appropriate lot size, and set the correct entry and exit points for the trade.

c)     When the trade is active, it must be actively tracked. In the example shown above, the trade ran out of steam once it attained the middle Bollinger band, so only the first profit target could be realized. Tracking therefore serves to ensure that any profits made are protected and if profit targets are not achievable, then an appropriate exit strategy must be sought.

Once profits are made, the process is repeated. If losses are sustained, then the trader must review the trade to seek out reasons why the trade failed. Once a reason for failure has been discovered, then another way not to trade the market would have been discovered; all to the trader’s advantage.

Adam

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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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