Euro (EUR) traders speculate on the strength associated with the Eurozone economy, when compared with its major partners. The partnership involving the Euro and US Dollar (USD) marks the absolute most liquid forex pair on earth, with tight spreads and broad price movement that supports a continuing flow of profitable opportunities.
While there are numerous approaches to trade the EUR/USD pair, three simple strategies have now been consistently effective. These could be executed by forex traders after all skill levels, with newer participants reducing position size to manage risk while experienced players increase size to take full advantage of the opportunities.
Equity traders can put on these techniques with CurrencyShares Euro Currency Trust (FXE), which tracks the forex pair in real-time. Leveraged and inverse ETFs can certainly be traded for those who have the abilities needed seriously to manage the excess risk. ProShares Ultra Euro (ULE) offers double long side exposure, but it is thinly traded, at just 24,283 shares each day an average of. ProShares UltraShort Euro (EUO) offers equal leverage to short sellers and greater liquidity, trading more than 700,000 shares a day an average of.
Buy Or Sell The Pullback
The EUR/USD trend thrusts in both directions and carries the cost from a single level to a different in a confident feedback loop that will generate considerable momentum. However, this rapid movement has a tendency to fizzle out as soon as the supply/demand equation shifts, often trapping latecomers in positions that’ll be excited for losses if the currency pair reverses and heads when you look at the opposite direction.
The pullback strategy takes advantage of this countertrend movement, identifying significant support or resistance levels that should end the cost swing and reinstate the initial trend direction. These levels often come at prior highs or lows in addition to key levels defined by Fibonacci retracements, moving averages therefore the inception point of this original thrust.
Buy The Breakout/Sell The Breakdown
The pair often grinds backwards and forwards within confined boundaries for extended periods, setting up well-defined trading ranges which will eventually yield new trends, higher or lower. Patience during these consolidation phases often takes care of with low-risk trade entries when support or resistance finally breaks, giving method to a stronger rally or selloff.
Good timing is necessary to make the most of this easy strategy. Enter too early plus the range could hold and trigger a reversal. Enter too late and risk escalates because the career will execute well above new support or well below new resistance. It’s often smart to reduce timing risk by opening a partial position as soon as the pair breaks out or down and contributing to it from the first minor retracement.
Enter Narrow Range Patterns
The pair will often rise or end up in a significant barrier and then go to bed, printing narrow range price bars that lower volatility and raise apathy levels. Coincidentally, this quiet interface often marks a robust entry signal for a breakout or breakdown. This tactic enters the career within the narrow range pattern, with a strong stop in place in the event of an important reversal
This setup often prints an NR7 bar, which marks the narrowest range price bar associated with the last seven bars. Originally seen in the U.S. futures markets within the 1950s, this powerful but simple pattern predicts that price bars will expand in a sizable breakout or breakdown. It’s also a low-risk entry considering that the stop loss could be set very near the entry price.
The Bottom Line
New and experienced Euro traders can execute three simple but effective strategies that take advantage of repeating price action.