The EUR offered an advanced level trade setup overnight. What made the EUR trade work was a number of factors. The European market opens an hour before the UK market. We can see that the initial price action was down as the European session got underway. Note the 2 candles that penetrated the low of the previous day, and closed back above. This indicates that yesterday’s low is strong support with buyers entering at this level. As the UK session begins, the EUR moves up, pulls back, and bounces off the previous day’s low once again. This time it has put in a higher low (the Big Hint) for the European session. After a bullish candle follows and with a low risk stop placed below yesterday’s low, an entry is taken.
When trading the EUR it is often useful to look at the CHF and see if the inverse is occurring. If the EURUSD is moving up then the USDCHF is likely to be moving down – with a similar pattern. I prefer to trade the EUR, but either is fine.
As the EUR price moved up, session resistance was tested which had also been a level of resistance in the US session the day before. Do not fight price ever. If it come back down and you’re stopped out – fine. If it moves through resistance, move your stop up to protect your initial profits and keep moving your stop up to protect profits. Stops are best placed under price structure, but always do the arithmetic before entering a trade to determine if the the Reward to Risk ratio is at least 3:1 – this means risking no more than 15 pips to get 45 + pips. Our targets are hit and we are done.
Let’s see if the GBP will give us an entry tomorrow before the week closes.
The trading has been tricky this week, and I attribute this to holidays and low volumes.
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See you back tomorrow.