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.
Long trade entry:
Wait for two consecutive lows to form on EURUSD and then on the 3rd bounce in the price you can enter long.
Bullish reversals usually form a basing pattern of 1 low then another lower low and then another higher low. This is also a chart pattern that works well on any other asset or currency pair generally but one that is also very specific to EURUSD just because it happens frequently. Sometimes it can also take the shape of an inverted head and shoulders pattern but that is not necessary for it to work.
The lows don’t all have to be at exactly the same level, but only need to be in roughly the same area.
Long trade stop loss:
Place the stop loss order below the lowest low of the 3 lows.
Long trade exit and targets:
Look to target the next resistance higher. Although powerful trends can start after this basing pattern on EURUSD, obviously it’s not always the case. So, taking some profits on the first sign of weakness on the bullish move is still an appropriate way to trade. Most often though, the next solid resistance higher will be reached after this basing pattern.
On the chart below, a bullish example of a long trade is shown:
Short trade entry:
Wait for two consecutive highs to form on EURUSD and then on the 3rd bearish turn in the price you can enter short.
Short trade stop loss:
Put the stop-loss order above the highest high of the 3 highs.
Short trade exit and targets:
Target the next support to the downside. This support needs to be of the same size, meaning if the pattern has appeared on the 1-hour chart, then the target should be also based on the 1-hour chart.
An example of a short trade is shown below:
On the above chart, notice how the two pairs of 3 highs (first marked with black numbers and the second in blue) are of the same nature. The first 3 highs are smaller and thus offer lower conviction for a top than the second pair of 3 highs. The second 3 highs (marked in blue) are taller and the shadows are longer. Thus the second pattern is more convincing than the first pair of 3 highs.
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