The Simplest EUR/USD Trading Technique
Forex trading is difficult, complicated, and confusing. That opinion almost certainly comes to the minds of novice traders when they are new to the world of forex, because they do not know how to develop a reliable trading technique. In fact, there are many ways of trading forex that are simple and easy to apply by anyone. Among them, the following three simplest EUR/USD trading techniques.
EUR/USD Trading Techniques with London Breakout Strategy
As the name implies, the London breakout strategy relies on the occurrence of a breakout at the beginning of the London session. When is the London session? In accordance with the division of forex trading sessions, the London session opens at 7:00 GMT and closes at 15:00 GMT or between 13:00-22:00 WIB.
To apply this EUR/USD trading technique, traders need to open a chart on the Hourly (H1) time frame, then make sure the chart model is a Candlestick. After that, follow these step-by-step instructions:
- Know the time settings on the platform. It will be easier if
the time setting is based on GMT or WIB (GMT+7); but if it is not possible,
then the trader can adjust it manually. In the London Breakout strategy, the
trader must correctly identify the opening and closing hours (15:00 GMT) of the
London session.
- After the London session opens and the price starts to form
a new candle (> 7:00 GMT), place a marker on the previous three candles (last
three candles of the Tokyo session). The markers can be two horizontal lines
which are equivalent to the highest peak and lowest valley between the three
candles. The two lines will act as Resistance and Support lines.
- Prepare pending orders. First, place a Buy Stop about 5-10
pips above the Resistance line. Second, place a Sell Stop about 5-10 pips below
the Support line. This 5-10 pips gap is not standard, so you can adjust it
yourself according to the trading volatility of the day.
- Leave the two Stop Orders until one of them is triggered.
After something is triggered, then immediately cancel the Stop Order that has
not been triggered. For example, in the example screenshot above, it is clear
that the Buy Stop was triggered, so you need to cancel the Sell Stop. This
manual cancellation is not required if you use an OCO Order as unexecuted
positions will be canceled automatically; but unfortunately, not many brokers
provide this feature, so chances are you can only take advantage of pending
orders.
- Take Profit and Stop Loss can be done based on the rules of
the risk/reward ratio, your assessment of the market situation afterward, or by
applying a Trailing Stop. No matter what method is used, the important thing is
that Take Profit and Stop Loss must be made at least one hour before the close
of the London session.
7 AM Trading Techniques
Similar to the London Breakout strategy, this EUR/USD trading technique is also based on a breakout in the Hourly timeframe. The difference is, this one is carried out with reference to the initial price of the Asian session, which is around 12:00 GMT, or 07:00 WIB. The steps:
- About two hours after the opening of the Asian session, make
sure that the two Hourly candles are perfectly formed and the chart begins to
form the third candle. To make it easier, mark the candle that was formed
during the opening hours of the Asian session at 12:00-13:00 GMT earlier as the
first candle.
- If the closing (Close) of the second candle is above the
High level of the first candle, then the price movement is expected to
increase, so it is recommended to open a Buy position. On the other hand, if
the closing of the second candle is below the Low level of the first candle, it
means that the direction of movement will go down, so it is recommended to open
a Sell position.
- Take Profit and Stop Loss can be done based on the rules of
the risk/reward ratio, your assessment of the market situation afterward, or by
applying a Trailing Stop.
EUR/USD Trading Techniques with Exponential Moving Average (EMA)
In contrast to the two strategies above, this third EUR/USD trading technique utilizes the Exponential Moving Average (EMA) indicator which is applied to the 5 Minute (M5) time frame chart. However, the rules are as simple as the previous two strategies. Here are the steps:
- Install three EMA indicators on the M5 timeframe, each with
periods of 8, 20, and 90. Different color sets for each EMA line. In this
example, the 8 EMA is red, the 20 EMA is blue, and the 90 EMA is yellow.
- If EMA 8 crosses EMA 20 and EMA 20 from top to bottom, then
it is a sell signal. Meanwhile, if the EMA 8 crosses the EMA 20 and EMA 90 from
bottom to top, then it is a Buy signal. For example, consider the green boxes
in the screenshot above.
- You can open a position when the EMA 8 just crosses the EMA
20. However, be careful of the possibility of fake as seen in the red box. It
is seen that EUR/USD rose after the 8 EMA crossed the 20 EMA, but then fell
further after the 8 EMA failed to break the 90 EMA.
- Because this is a type of scalping, you should only set a
Take Profit threshold between 5-15 pips. While Stop Loss can be applied right
on the EMA line that is above or below the price.
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