Euro (EUR) traders speculate on the power of the Eurozone economy, compared to its major partners. Then, the relationship between the Euro and U.S. dollar (USD) notes the most liquid forex pair in the world. And this was due to its tight spreads and broad price movement, supporting a continuous flow of profitable opportunities.
Even though there are a lot of ways to trade the EUR/USD pair, there are some strategies proven to be consistently effective. Forex traders at all skill levels can execute this, with newer participants diminishing position size to control risk. At the same time, experienced players increase the size to take full advantage of the opportunities.
Buying or Selling of Pullback
The EUR/USD trend pokes in both directions and delivers the price from one level to another one in a positive feedback loop that can create considerable momentum. But, this fast movement tends to fizzle out when the supply/demand equation shifts. It often traps latecomers in positions that will be excited for losses when the currency pair reverses and went towards the opposite direction.
In addition to that, the pullback strategy takes advantage of this countertrend movement. And it determined significant support or resistance levels that should end the price swing and reinstates the primary trend direction. Also, these levels usually come at prior highs or lows as well as key levels defined by moving averages, Fibonacci retracements, and the inception point of the original trust.
Buying Breakout and Selling Breakdown
Typically, the pair often grinds back and forth within enclosed boundaries for extended periods, setting up well-defined trading ranges that will end up yielding new trends, higher or lower. Thus, patience in these consolidation phases, most of the time, pays off with low-risk trade entries when support or resistance breaks, giving way to a strong rally or selloff.
What traders need now is excellent timing to take full advantage of this simple strategy. Entering a little early could end up with a range that could hold and trigger a reversal. However, entering too late might result in risk escalating because the position will execute well over new support or well under new resistance.
Most of the time, it is a better idea to diminish timing risk by opening a partial position in the time the pair breaks out or down and placing to it the initial minor retracement.
Entering Narrow Range Patterns
Usually, the pair will rise or fall into a significant barrier then go to sleep. After that, it prints narrow range price bars that lower volatility and increases apathy levels. Similarly, this quiet interface often marks a strong entry signal for a breakout or breakdown. Also, this strategy enters the position within the narrow range pattern, with a tight stop in place in case of a major reversal.
Now, this setup often prints an NR7 bar. This marks the narrowest range price bar of the last seven bars. In the 1950s, they initially observe in the U.S. futures markets. And this powerful but simple pattern suggests that price bars will expand in a sizeable breakout or breakdown. Then, it is also a low-risk entry because the stop loss can be set really close to the entry price.