When FX Traders first come to trading platforms, their interest is almost universally drawn to the same vehicle.
The reasons for this popularity make sense. Europe and The United States represent the two largest economies in the world. In the Traits of Successful Traders series, David Rodriguez looked at exactly this question while examining over 12 million live trades, placed by real retail. As you can see, EURUSD is actually the least profitable pair at many times throughout the day, despite its raving popularity. This is an important point, as this is shortly after London, the largest FX market center in the world, opens for the day and brings a massive amount of volume into the market.
From the research, it appears as though as volume and market activity increase — trader profitability in EURUSD decreases, and decreases more-so than what was seen in the other most commonly traded currency pairs. Given the information we have on how traders have fared in the past, we can build an approach based on what has or has not worked for other traders in the past.
As a matter of fact, after The United States closes for the day at 5: One of the primary reasons for this may be in the fact that the Asian session typically sees smaller price movements than what may happen during the very active times of the day. Support and Resistance, generally speaking, will see much more respect during the slower Asian trading session.
Because of these slower price movements and the fact that support and resistance will have a greater tendency to be respected, traders may find range trading approaches on the Euro-Dollar to be most accommodating during the Asian Trading Session. Once a trader knows they want to take a range-based approach on the pair, filling in the strategy can be simple. There are numerous materials available from DailyFX to assist traders with their range-trading approaches.
In How to Analyze and Trade Ranges with Price Action , we looked at a mannerism of trading ranges using only price inflections and swings, no indicators necessary. By taking an approach such as this, you can locate the support or resistance in the market as the Asian session opens, and look to buy when price is at or near support; and look to sell when price is at or near resistance: David suggests that, since markets generally exhibit more volatility during the active hours, and this is when traders have been the most prone to The Number One Mistake that Forex Traders M ake ; traders could use this volatility to their advantage by using aggressive risk-reward ratios with breakout strategies.
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