Forex market trading strategies
The daily chart of the EUR/USD Forex market has rallied strongly for 4 weeks. There have been 4 surges. Each is one or more big bars followed by one or more smaller bars. Three or more surges mean that the rally is a parabolic wedge buy climax. That typically attracts some profit taking.
But it is also a sign of strong bulls. Today went below yesterday’s low. It was the 1st pullback in 13 days. The rally is therefore also a 13 bar bull microchannel. Traders have been so eager to buy that they have been buying above the prior day’s low for 13 days. They finally got an opportunity to buy a pullback.
Profit-taking should create minor reversal soon
The bulls typically take that buy, expecting at least a scalp. However, it is the 1st sign that the strong bull trend is weakening. Bulls will take more profits soon because their stop is too far below. That creates too much risk. The easiest way to reduce risk is to take some profits. Consequently, traders should expect a couple of weeks of sideways to down trading to begin within the next week.
The pullback usually tests the bottom of the most recent buy climax. That is the low of 4 days ago. It also typically tests the 20 day EMA and one or more breakout points. The most obvious is the January 1 high.
The bears will probably not be able to create a bear trend without 1st forming a trading range. Traders should expect that bulls will buy the 1st 1 – 2 week selloff for either a test of this week’s high or for a resumption of the 4 week bull trend.
Overnight EUR/USD Forex trading
The 5 minute chart of the EUR/USD Forex market sold off early in the Asian session. It fell below yesterday’s low overnight. However, this bear breakout was only 2 pips. Traders bought at yesterday’s low the the EUR/USD rallied 50 pips.
The European session has been in a trading range for 6 hours. Day traders are scalping. The legs up and down are big enough for 20 – 30 pip scalps.
The bulls want another bull candlestick on the daily chart. However, the open of the day is probably too far above.
Alternatively, they do not want today to close on its low and below yesterday’s low. That would increase the chance of lower prices again tomorrow.
At a minimum, they would like today to close above its midpoint. If they are successful, they will have a better chance of at least one more brief leg up for 1 – 3 days before there is a bigger profit-taking pullback.
The bears always want the opposite. They want a bear trend reversal. They know that is unlikely. But they will have a better chance of a minor reversal for a couple weeks if they can start to get some days closing near their lows.
With the past 6 hours being sideways, today will probably remain in a trading range. Day traders will look for reversals.