EURUSD Day Trades – November 1

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EUR/USD Day Trades – November 1

Another trending day for the EUR/USD, providing ample opportunity to trade the short-side (puts) during the London session and the start of the US session.

To take advantage of the downtrend, look to enter on pullbacks and exit on the next swing lower. Using 0.01% envelopes provides a context for pullbacks on a 1-minute chart. This technique is addressed in prior day trading posts, including EUR/USD Day Trades – October 8

Just prior this trade, a double top develops and then breaks lower. The break lower signals current momentum is in alignment with the overall downtrend of the day.

Figure 1. EUR/USD 1-Minute Chart

The rectangles on Figure 1 show the entry and exit. The entry is taken near the upper band, with a 3.5 pip stop placed at the time of the trade. This could have been almost immediately reduced to 2 pips (just above the pullback high) as the price began to drop shortly after the entry.

A Fibonacci Expansion tool is used for the exit. The most common exits are 61.8 or 100, but which one is used will depend on how aggressively the price is moving toward the target. Due to the strong selling pressure, the 100 level was used, snagging a profit of 10 pips.

This trade occurred shortly after trade 1, as shown in Figure 2. Shortly after entry it became apparent that the price action was a little choppier than during trade 1. The price had a tendency to consolidate a little more, and therefore at that time was showing less strength than on the first trade.

Figure 2. EUR/USD 1-Minute Chart

This indicated the target would likely have to be at the 61.8 level, instead of the 100 Fibonacci Expansion level.

The entry is taken near the upper band, with a 3.5 pip stop. Once the price dropped, the stop was reduced to the high point just seen, reducing the risk to 2.5 pips. An exit is taken at the 61.8 Fibonacci Expansion level, for a profit of 9 pips.

Two more potential trades are marked with small red arrows in Figure 2. Both would have been profitable.

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These trades were taken because they aligned with the overall trend, and on the timeframe being viewed (1-minute chart) the price was continually making lower-lows and lower-highs (See: Capitalizing on Lower Highs and Higher Lows in Price). This is the only time this strategy should be used; it produces a lot of signals which need to be filtered out. The primary filter is that there must be a strong trend in place in to make trades.

A Fibonacci Expansion tool is drawn for each trade, using the most recent price swings. This provides a target, but is somewhat subjective. I may draw my Fibonacci tool connecting to different price levels than you would, which will produce a different target level.

Unless there is a lot of strength, I always opt for a more conservative profit target. Alternatively, you can use a fixed target, such as 6, 7 or 8 pips. Since the maximum stop is 3.5 pips using a 1 minute chart, a 6 to 8 pips fixed target provides a nice reward-to-risk ratio, and the target is still likely to get hit.

Quiet Monday EURUSD Day Trades – November 11

Mondays are historically the lowest volatility day of the week. That means some special attention is required when selecting trades. Figure one shows EURUSD volatility per weekday, with Monday averaging about 60 pips of movement. Wednesday and Thursday see a significant jump in volatility.

Figure 1.

November 11 is also special since North American banks are closed for a holiday. Markets are open, but many Canadian and US traders and bankers will be taking the day off, so there is likely to be limited action following the close of Europe.

Writing this near the start of the US session there is very little opportunity. After an initial push higher at the start of the European session the price has been moving sideways in a 6 pip range. A breakout is required before any further trades can be made.

Also, over the course of the day the EURUSD has already moved 62 pips. Figure 1 shows movement for the entire day, not just when major markets are open. Therefore, with the pair already having moved 62 pips, any trades which do occur are likely to be inside the price range already established.

Figure 2. EURUSD – 5 Minute Chart (Yellow Marks London Session)

In other words, if entering trades during the US session on this day, traders will want to be highly selective.

At the far right hand side of the chart the price is moving up to test the highs of the day. While that type of action after two hours of the pair doing nothing may seem alluring, it is not a high probability trade. In order for a high probability trade to develop, the price will either need to break through the daily highs and keep trending, or get rejected near the daily high and start trending lower.

Even looking back at the uptrend that kick started the European session there are few opportunities.

Figure 3 shows the one high probability trade (using a 5 minute chart) during the European session uptrend. The trade is taken as the price pulls back to the lower band after definitively moving past the former high. A Fibonacci expansion tool is used to find an exit–both the entry and exit are marked with black rectangles. For information on these bands, stops, targets and the basic strategy, see: Forex Day Trades-October 7 and subsequent posts.

Figure 3. EURUSD Day Trade – 5 Minute Chart

There are also two red “x” on the chart. These mark potential trade signals, as the price pulled back to the lower band during an uptrend. I would not take these trades though, especially on a “quiet” day.”

Notice right before the first “x” how the price barely manages to make it past the last high. The pair is not showing the same strength here as it was during the trade taken. If the signal were traded, it would have been profitable though. It is not that this is a very bad signal, but given that the day is likely to be quiet and may turn choppy I only want to take the best looking signals.

The next “x” is also not traded for the same reason. Just before the potential entry (pullback to lower band) the price couldn’t definitively made a new high. Also, by the time the potential entry occurs the price is making a lower low–these are not signs of a healthy uptrend for trading purposes. In this case, it was a good trade to avoid as the market did almost nothing for the next two hours.

As the US session continues to unfold (Europe still open) there is another potential trade, but this one also isn’t taken. Figure 4 shows how the price did indeed breach the high former high of the day, but after creating that high it pulled back, and then on the next rally made a lower high. The entry point was also at a lower low, so no trade is taken. Given the overall context of the day there was a high likelihood this break higher would fail, and it did.

Figure 4. EURUSD 5 Minute Chart

It is possible one, two or more high probability signals may pop up during the rest of the European or US session. But quite often on a day such as this where many traders and bankers are likely taking the day off–and it is a lower volatility day to begin with–catching one or two trades and also taking the rest of the day off isn’t a bad idea. Trends are likely to lack follow-through and the possibility for slow choppy trading is high, so if you decide to trade, only take the best signals.

EUR/USD trades below 1.1120, looks to snap two-day winning streak

The EUR/USD pair registered its highest daily close since early November at 1.1151 on Tuesday but failed to preserve its bullish momentum. The broad USD strength and the shared currency’s uninspiring performance on Wednesday caused the pair to erase the gains it posted on Monday and Tuesday. As of writing, the pair was down 0.28% on the day at 1.1118.

EUR struggles to find demand

Earlier in the day, the IFO’s Current Assessment Index improved to 98.8 in Germany to beat the market expectation of 98.1. Additionally, the Business Climate Index and Expectations Index both came in higher than analysts’ estimates. However, the shared currency couldn’t take advantage of the upbeat data.

Commenting on the data, “this positive IFO reading brings a conciliatory end to the economic year 2020. It ends the year on a positive note and with the hope for a rebound in 2020,” said ING analysts. “However, as much as we would like to see the German economy leaving the stagnation territory behind, truth is that any tangible bottoming out is still hard to find.”

Other data from the eurozone revealed that inflation, as measured by the core Consumer Price Index (CPI), remained steady at 1.3% on a yearly basis in November as expected.

In the meantime, escalating trade tensions between the EU and the US seem to be hurting the EUR as well. “We can’t get global US trade deficit down without reducing the trade deficit with Europe,” Trade Representative Lighthizer told Fox Business Network on Tuesday. “We have a basic trade problem with Europe, we have to find ways to sell more goods to the EU.”

On the other hand, the greenback continued to gather strength against its major peers on Wednesday as part of the ongoing technical correction and weighed on the pair. The US Dollar Index advanced to its highest level in a week at 97.48 and was last up 0.27% on the day at 97.45.

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