Anatomy Of A Trade: Euro (EUR)
Last Wednesday, I showed on the chart how the breakdown of support on EUR/USD meant that it would continue to fall until reaching new support and tehn possibly establishing a new range. Well that’s exactly what happened.
Take a look at last week’s chart here and compare it to today’s chart. Notice how in the commentary I indentified the 1.3250 level as support and how price reached that level in the ensuing days, only to bounce from the lows at 1.3215 and move higher toward near-term resistance.
In that chart I identified the 1.3430 level as resistance (as it was prior support that broke down) and that appears to be holding up so far this morning. So how does one trade this?
Well it depends on your time-frame for trading but these trades are known as “swing trades” and have a 2-5 day outlook and are considered intermediate term trades. The way to trade these is simply to buy at support and sell at resistance, and use an appropriate stop-loss.
In this case, you could have bought at 1.3250 with a 50 pip stop loss and captured 150 pips of profit, for a tidy 3:1 reward/risk ratio. By taking trades with a positive expectancy, you are stacking the odds in your favor for success!