New Home Sales data is ready to devastate the recent new low around 1.3450 with wonderful news for America's dollar. Only the RSI of the four technicals put to the daily EUR/USD chart is far above it's centerline and clearly ready for a easy ride downward but that news will easily overpower any lagging technical indicator.
The hardest hitting news items for the EUR/USD pair are canceling each other out. Turning then to the technicals, they are all clearly far below their center lines, except for the StochRSI.
EUR/USD got right up to our 1.3628 resistance area yesterday, and subsequently dropped to test the 1.3444 low. There is relatively strong support at this low, but if we continue lower, the LT flat cycle’s 3rd channel extension target (black) and the LT angled cycle’s 4th channel extension target (dark purple) coincide at around the 1.3333 area.
Breakout strategies are very popular with many traders because price must develop a large amount of energy to escape from a tight trading consolidation pattern. If it is able to achieve this goal, then the resultant momentum can be capable of producing a movement of significant size.
Many Forex experts claim that fakeouts are caused by large institutional players, such as banks, creating them deliberately in order to stop-out smaller traders. Although, there is much speculation that this could be true, there is still no real evidence proving the validity of this theory.
Price consolidation boxes are delineated by resistance and support levels. In addition, we are aware that there is a strong tendency for price to propel itself through one of these trendlines only to retract shortly afterwards. This whipsaw action causes many smaller traders to get stopped-out and is the reason why it is important to be able to distinguish breakouts from fakeouts.
The central idea behind trading with large stop-losses is to achieve a very strong win:loss ratio which will then offset the poor risk:reward one. For instance, if you are able to achieve 11 wins of 50 pips against 1 loss of 500 pips, then you would have realised a profit of 50 pips.
Forex options are becoming more and more popular nowadays among Forex traders as an additional tool for short-term speculations which are based on technical events. Although binaries are still young and suffer from liquidity and hence high premiums, Swing-Traders, Scalpers and Day Traders find the predetermined risk-reward ratio (~70% on trades that are "In the Money", and 10% on trades that are "Out of the Money",) extremely productive.
Your main aim when trading Forex is to win more profitable trades than losses. You must also realise from the outset that you will not become a Forex expert overnight in the same way that doctors, surgeons and lawyers do not. As such, you must adopt a very professional approach to improve your Forex knowledge by minimizing your exposure to risk.
As a priority, your Forex trading strategy must safeguard your budget whilst increasing your profit potential. To provide even more protection for your account, you will find that it is good practice to seek additional confirmation every time you detect new entry opportunities. One method of undertaking this task is to examine the candlestick patterns on the hourly or four hour trading charts of the currency pair in question. Ideally, you should look for a sign that supports your new entry opportunity which will increase the chances that you are selecting a profitable winning trade.
