EURJPY is another Forex pair that is high on the list of “proxy” currency pairs for the risk sentiment in markets. The two currencies that comprise this pair, the Euro and the Yen have different roles in the Forex market. The Japanese Yen is considered a safe haven currency while the Euro has a status of a risky currency. As a result, when risk appetite is driving markets EURJPY tends to rise in an uptrend by default and when risk aversion kicks in as a general rule the EURJPY pair will switch to a downtrend.
This dynamic of being on the opposite side of the risk sentiment spectrum very often creates a lot of volatility and powerful trends on this pair. Indeed, EURJPY is one of the most volatile and most trending currency pairs in the Forex market. This provides many excellent trading opportunities but can also be a source of a lot of trouble for Forex traders.
Despite being one of the most trending currency pairs trading the EURJPY pair is far from easy as the high volatility can contribute to some frustrating experiences for Forex traders. On intraday charts, volatile price swings are a normal and expected occurrence – often in both directions, up and down. Retracements can be sharp and sudden and often scare-off many traders after which the previous trend resumes anyway
Characteristics of USDCHF
USDCHF is another major currency pair that is closely tied to risk appetite and risk aversion in the markets. The price behavior is often affected by it and traders who intend to trade the USDCHF pair should keep these risk sentiment related factors in check.
Volatility is normally low on USDCHF compared to other Fx pairs, usually around 50-60 pips, but can rise significantly in times of risk aversion. USDCHF can rise and fall very fast under specific conditions, for example, either risk aversion or risk appetite taking control in the market. Frequently there will be periods of calm low volatility type of price action with sudden increases in this volatility and then a reversal back to low volatility.
Unlike USDJPY, however, USDCHF is not so closely correlated with US or global stock markets. Instead, it tends to be somewhat more reactive to risk-averse instances driven by European woes rather than crises happening elsewhere.
Characteristics of EURCHF
Much like the JPY currency pairs, it is nearly impossible to talk about the Swiss Franc or CHF pairs without mentioning its safe haven characteristics and the long-standing relation between risk sentiment in financial markets and the Swiss currency.
The Swiss Franc also has the desirable characteristics of a safe haven asset or currency like the Japanese Yen and the US Dollar. Any CHF currency pair in the Fx market, therefore, has a strong relationship with the general risk sentiment across markets. The typical behavior is a depreciating Swiss Franc (CHF pairs rising) in a risk appetite environment and a strengthening Swiss Franc (CHF pairs falling) in a risk-averse (risk-off) market environment.
As a result, EURCHF, to some degree, also behaves as a proxy currency pair for risk in the markets. The EURCHF pair tends to rise more gradually when risk appetite dominates and it tends to decline at a more aggressive pace when risk aversion is in the driving seat. When trading safe haven currencies this a usual behavior that one can expect and although there can be long periods of risk appetite and rising markets, traders should not be complacent because risk aversion can kick in suddenly.
When we talk about EURCHF we also have to note that we are talking about a currency pair comprised of two correlated currencies. The Euro and the Swiss Franc, being the currencies of two neighboring economies tend to be naturally correlated as their economies are closely linked to each other.
USDCAD is another commodity currency pair that we will review in our series on the behavior of price action of the different Forex pairs.
General characteristics of USDCAD
Widely known as the Loonie Dollar, CAD is also displaying the characteristics of a commodity related currency and is therefore usually driven by movements in commodity prices, mainly oil.
While related to a large degree to the other commodity currencies (such as AUD and NZD), the Canadian Dollar tends to behave in a rather different manner on the charts compared to the Aussie and the Kiwi Dollars. One of the reasons for that probably has to do with the fact that, first of all, the Loonie Dollar is primarily correlated with a different commodity (oil) compared to metals and dairy products as is the case for the Australian and New Zealand Dollars.
But, additionally, the Australian and the New Zealand economies are closely linked to each other on a trade basis as the two countries do a lot of trade between each other and as a result, their currencies are also intrinsically closely correlated. However, the largest trading partner of Canada is the United States and from this aspect, the Canadian Dollar also has some positive correlation with the US Dollar. This largely explains the slow and rangy price action that can be quite commonly seen on the USDCAD pair, as is often the case with pairs comprised of currencies that are closely correlated.
Price spikes in both directions are common on USDCAD. Unlike what is usual for most other currency pairs where a large candle indicates strong momentum, on USDCAD these can be often completely reversed. The smallest candle indicated with an arrow on the above chart is about 60 pips tall, while the biggest one is a whopping 150 pips - USDCAD 4-hour timeframe
The next commodity Fx pair that we will look at is NZDUSD as part of our series on the characteristics of price action of the major Forex pairs.
Characteristics of NZDUSD
The closest cousin of the AUDUSD pair, NZDUSD is highly correlated with AUDUSD. Its trading characteristics and the behavior of price action on NZDUSD are therefore very similar to the ones seen on the charts of AUDUSD. The price generally moves in orderly steps especially on the larger timeframes such as 4-hour, daily and higher, although fake breakouts can occur from time to time.
NZDUSD most of the time trades in a swingy fashion. That is the price tends to move in swings which is probably what makes the pair very well suited for swing trading. The quite often and frequent formation of trendlines and channels further strengthens the swing trading characteristics of the NZDUSD major pair, but also of other NZD pairs too.
AUDUSD is the first commodity currency pair that we will discuss in our series on the characteristics of price action of the different major Forex currency pairs.
Some characteristics of AUDUSD
Also known simply as the “Aussie”, the AUDUSD currency pair very often trends at a very gradual pace with the price moving back and forth – often drawing a stairways alike formation on the charts. Fast and sharp one-way moves are rather uncommon and instead, the price action tends to move in a zig-zag fashion.
For example, if the trend is down AUDUSD will usually take a gradual path of making two steps down and one step up rather than just moving straight down for a prolonged period of time.
If the trend is bullish, the same tends to hold true and AUDUSD would most probably gradually move up – partially retracing many of the bullish swings along the way.
Whenever we are discussing the Japanese Yen and its trading characteristics in the Fx market, the first thing that comes to mind is risk sentiment. The USDJPY pair is the major Fx pair that is most famous for its sensitivity to risk. Risk on and risk off changes in the market are often the main drivers of the USDJPY exchange rate.
Risk appetite drives this currency pair up and a risk aversion mood can quickly send it tumbling lower. For the same reasons, USDJPY is also most of the time positively correlated with US stock indices such as the S&P 500 and with US bond yields such as the 10-year treasuries.
USDJPY is usually not the most volatile currency pair in Fx. In fact, it is one of the least volatile major currency pairs which makes it suitable for trading some specific strategies. However, its volatility can change suddenly due to risk-on – risk-off changes in market sentiment which can lead to sharp and unpredictable movements in some situations. During times of risk aversion, the volatility of USDJPY rises substantially. The good news is that these situations where the markets are falling can also be profitable for Forex traders.
The price action on USDJPY is generally gradual. Reversals can be sharp but most often they happen at an already established support or resistance zone and often come in the form of some pattern such as double top/bottoms, head and shoulders etc. This pair can trade in a sideways market often and for prolonged periods of time.
Every currency pair in Fx has a unique character. GBP is famously known among Forex traders as the most volatile major currency, and normally, most of the GBP Fx pairs are highly volatile, including the most popular one - GBPUSD. As a result, different trading strategies have been created purely based on this volatility of the Pound, a notable example being the London open breakout strategy.
A little bit about GBPUSD
GBPUSD usually exhibits very trending price action that is very specific to this pair only. When a trend starts on “Cable”, the price can travel great distances without much looking back or pausing. Trends are also often thrusting with tall candles followed by tight consolidation. Sometimes retracements are also volatile, with tall candles in the opposite direction of the trend. But, nonetheless GBPUSD trends don’t stop easily, and such retracements don’t last very long before the predominant trend continues and catches momentum traders on the wrong side of the market.
All of the above suggests that we should probably be using a different set of indicators in a slightly different way when trading different currency pairs. For example, chart patterns are often disrupted on GBPUSD due to the volatility. The structures are often in an irregular shape and it is not uncommon for GBPUSD chart patterns to fail miserably.
So trading reversals such as trying to pick top and bottoms can be very tricky and is not the best way to trade this pair. Using trending strategies on GBPUSD, however, tends to work much better. In this article, we’ll focus on this aspect of trading the GBPUSD currency pair.
The EURUSD currency pair is the most liquid and most traded instrument in the Forex market. It, therefore, attracts a lot of attention from retail traders as well as pros, such as the big banks and institutions that professionally trade Fx.
If you are familiar with the Forex market to some degree, you probably already know or have come to understand that every currency pair behaves slightly differently on the charts, even when it looks similar. In a way, every currency pair has its own unique personality and most often behaves in line with this “personality”.
In this article, we will discuss strategies and patterns that are based on some of these unique characteristics of EURUSD which can be used specifically on the charts of the EURUSD currency pair. EURUSD normally has very consistent patterns on the charts and the price action is usually moving in an orderly manner. Chaotic price action is rare and probably you will only see it when big events catch the market off guard and surprise traders.
EURUSD also often trades in very well-defined channels across the different timeframes and charts, so keeping an eye on that perspective is also very valuable. Breakouts also often provide good trading opportunities. Support and resistance levels generally tend to hold well.
Support and resistance on the monthly chart are very important technical indicators as they affect all lower timeframes. These areas on the chart usually indicate major multi-year highs or lows and the price almost certainly reacts at them on the lower timeframes.
Trading the monthly chart offers long-term trading opportunities that often provide profits of thousands of pips. Trading patterns and signals are much more reliable and fake-outs are far less common. These are some of the main reasons why many serious traders prefer to trade the monthly chart.
This strategy is quite simple and based only on solid technical trading principles that the big institutions and interbank Forex traders also trade on. The classic indicators and patterns on the monthly timeframe work very well because so many people are trading by them and there is no single player that can control the market to that degree to cause fake-outs on the monthly chart. In contrast, all lower timeframes can be affected and are often manipulated in this way.
On the chart lower, we can see such trade examples on the monthly chart.
The 50-week and the 200-week moving averages are some of the most important indicators that are always looked at by the pro traders. They act as support and resistance on the higher timeframes (most notably the daily, weekly and monthly) and crossovers between the two can also indicate major trend changes. This strategy is based on these two main principles related to the 50-period and the 200-week period averages and additionally uses the Stochastic Oscillator to determine potential trading opportunities.
Since it’s traded on the weekly chart, this strategy is of long-term nature which means that trades will not be generated frequently and trades need to be held for a longer period of time. You can expect trades to last anywhere between a few weeks and up to several months.
It's fairly easy to trade this strategy and there is scope for a degree of subjectivity and additional tools/indicators to be used with it. The required alignment of the moving averages ensures that the trader is taking trades in the direction of the prevailing trend only and helps to filter out trading opportunities of better quality.
Below is an example of a trade generated with this strategy.
The daily timeframe gives an opportunity for longer-term traders to profit from the Forex market. The following strategy is to be used on the daily chart only, on which it can generate great trading opportunities and profits.
Since it is based on a relatively large timeframe, patience will be needed when trading this strategy as not many trades will be generated compared to trading strategies based on smaller timeframes. The advantage is that the strategy is very simple and almost anyone can use it to take trades and profit with it.
It consists of several simple rules which when followed will provide good trades and offer the potential for profit. It’s recommended to use it on the major pairs only because chart patterns work better due to the good liquidity and volume on these currency pairs. The strategy can be enhanced by combining it with other tools and indicators as we shall see later in this article.
Four trades that were generated by this strategy are shown on the chart below.
This is a powerful trading strategy that works very well during strong market trends and can offer excellent rewards.
Most importantly, due to the accuracy of the indicators used and the conditions under which they are used, this strategy enables traders to enter only the best and strongest Forex trends out of which the best trading opportunities are filtered out and considered for taking a trade. It may not generate as many trades as other strategies, but trades which are generated are with a higher degree of accuracy.
It’s easy to implement and to use this strategy. It doesn’t require expert knowledge of the markets or extensive understanding of technical analysis principles. The strategy can be applied on all currency pairs with pretty much the same performance/results. It also works well on different timeframes, but the 4-hour chart has shown the most profitable results.
On the chart below, we show a real Forex example of how this strategy based on the FxTR Improved RSI indicator and two EMAs looks on the charts:
The following strategy can be used on any of the intraday charts however it has shown the best results on the 1-hour timeframe and therefore it’s best to use it on the 1-hour chart. It is most suitable on the major Forex pairs, although there are no limitations regarding the Fx pairs it can be applied on.
This Bollinger Bands - CCI strategy is not a day-trading strategy, meaning trades can be held for as long as the conditions for the trade remain true regardless if that means holding the position overnight.
The main goal of the strategy is to profit on the acceleration of trends and their continuation in the direction of the trend in force.
Below is an example of how the strategy looks on the charts:
The Stochastic Forex Scalping Trading Strategy will allow Forex traders to make incremental profits over short time frames. Over time, these small profits can add up to substantial amounts and can prove to be very lucrative for forex traders.
For this particular trading strategy, the timeframe that should be used is the 15-minute chart. It can also work well as a scalping strategy on the 1-minute and 5-minute timeframes. You may use any currency pair that you like for this strategy.
It is important that you set up your charts right in order to get the best results from this trading strategy. You may choose any trading session that you desire to use, and it is recommended that you work with the 1-minute, 5-minute, and 15-minute charts.
We will be using MetaTrader4 Indicators for this setup. Here are the indicators to use:
Scalping is a popular trading technique in forex trading. It involves the trading of currencies in real time which means that positions are held for very short periods of time.
Here, I will present a 1-minute scalping trading technique that you can use for your Forex trading. You may use any currency pair that involves majors for this strategy.
The indicators that will be used in this trading strategy are Bollinger bands (18 period) and the RSI indicator. We will also use the MACD indicator and the 3EMA indicator.
You should be using a 1-minute chart with this strategy. You may enter the trade in either of 2 ways – with a long entry or with a short entry.
With the long entry, you must wait for the 3EMA to cross above the 18 Bollinger bands middle line. In addition, the RSI needs to be above 50 and the MACD histogram needs to be above 0.
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