Author: Chris Miles

Top-down technical analysis of Forex pair EURUSD

We decided to provide another brief top-down analysis outlining the basics of trading the EURUSD pair since it has shown to be the most popular among all of our funded traders. We will continue to provide you with more technical analysis breakdowns, as well as in-depth tutorials.

From top to bottom, we dissect the EURUSD currency pair chart and provide brief insights into the tools and excellent trading habits we employ. We looked at all of the instruments that our Forex traders trade, and the euro versus the dollar appears to be the most popular.

The EURUSD is the most popular currency pair to trade in standard trading since it has mild to moderate volatility and the dollar has a weekly fundamental impact.

Most Forex traders would like to trade with higher volume, however too much volume and volatility can make trading challenging at times. This is due to the market’s ability to move 50 pips in either direction, confusing everyone left, right, and centre.

We go over how a more relaxed swing trader would break down the chart to discover long-term opportunities in more detail. It’s all about refining our charting practices, and when we demonstrate any charting ability, our Forex traders always respond positively.

It’s important to remember that it’s not always about how effectively you can break down a chart. Risk and trade management are the first steps to becoming profitable. Technical analysis will only improve your probability and potential win rate.

Monthly EURUSD chart

We begin our technical analysis on the monthly EURUSD chart, as we normally do, by looking for large momentum movements, overall structure, and trends. Once we understand the candles, we can then map out our initial ideas with key levels.

The prior monthly candle on the monthly EURUSD chart was strongly bearish, with a lot of momentum carried down in the moving average, which is currently bullish on this timeframe.

We’ve also used the 200-month moving average as temporary resistance. Overall, the price action has been essentially squashed in a 300-400 pip range over the last 6 to 12 months.

Weekly EURUSD chart

Dropping to the weekly EURUSD chart allows us to gather a little more detail from a higher timeframe perspective. However, recent candles on this weekly EURUSD chart have shown a lack of clarity within that monthly range, with both higher lows and lower highs printed.

When this occurs over a long period of time, it is critical to take a step back and consider the overall direction, as well as interests that correlate. It could be the calm before the storm, with the break providing additional directional force in the following weeks.

Looking at negative scenarios, 1.1500 appears to be a possible target after spotting a Fibonacci movement from the 78.6 percent retracement level. This would remove all of the recent immediate lows on the weekly chart, potentially providing a safe level to place stops.

Make sure you remove the Fibonacci and other tools from your EURUSD chart breakdown once you’ve extracted the information from them. Throughout the timeframes, try to keep the chart as tidy as possible.

Daily EURUSD chart and lower

On the daily EURUSD chart, the bearish confluences appear to be growing, with the overall structure indicating a downtrend in alignment with the bearish moving averages, all of which have crossed to the downside, including the 200 daily moving average. We may see patterns emerge when we connect the dots from higher timeframes to lower timeframes, allowing us to locate profitable opportunities.

On the daily EURUSD chart, as we approach the supportive regions, we must be wary of the potential for manipulation and only short when all confluences are active, as well as your entry rules.

As we drop further into the 4 hour and 1-hour EURUSD chart, it’s easy to see that there is mess and not much clarity. We advise traders to sit on their hands and wait for the charts to show more structure and not be trapped in no man’s land.

On the chart, an hourly closure below the support and a break into the 1.1750 could present opportunities to move south. On the 4-hour timeframe, there is a visible downtrend, and maintaining that momentum can be quite profitable.

This isn’t a trading recommendation or signal; instead, we’re demonstrating ways in which traders can analyse charts for new investment opportunities.

Please feel free to contact us and we will provide further analytical breakdowns on various instruments, with a focus on lower timeframes.

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Our new trader’s Forex dashboard

When used correctly, Fibonacci is a very profitable tool for a Forex trading.

We are excited to announce the launch of our new Forex dashboard, which has been designed specifically for our Forex traders. We’re very pleased with our recent increase in trader numbers, and we recognized that our Forex traders required a better user interface to stay on top of their trades.

Our mission is to become the best prop firm in the world, offering solutions to all Forex traders. Only by providing the best tools with straightforward functions that assist you with your trading tasks will we be able to achieve this.

Forex metrics

Account metrics presented in a clear format aid in the comprehension of data. That’s why we’ve carefully considered and mapped out a new way for all of our Forex traders to see ongoing, real-time performance statistics. The dashboard’s main elements are account balance, profits, and equity, however there are many other features to explore.

We use account performance and order history to display the history of trades and other statistical data in a graphical format. This game is all about the long-term trade sample sizes, and seeing all wins and losses in detailed metrics will help establish patterns when reviewing trades. The averages and trade expectancy, as well as instrument trade durations, will be clearly displayed on our Forex dashboard.

Our support

We will be able to provide more in-depth support to our Forex traders with stronger partnerships that focus on building more profitable performances as we all begin to use our new dashboard. Alerts and round-the-clock monitoring will be available to keep traders updated about their account and any modifications or updates. We intend to provide a platform where our Forex traders may examine their trades and better themselves in order to maximize profits.

All of our reviews and successful Forex traders who were able to meet their profit targets indicate that we provide top quality support. As we continue to develop our Forex dashboard, we want to hear from our Forex traders about ideas that could enhance trader experience.

We have previously made improvements to the account metric and data, but we’re always searching for innovative ways to improve. Our traders currently invoice us manually in order to receive payment, however, if our traders prefer it in the future, it may be possible to have the payment method completed within our platform.

Improvements

As we grow as a prop firm, we will continue to improve our Forex dashboard to make it as simple and convenient as possible for our traders to gather all of their information. Our current Forex dashboard is in beta mode while we iron out any errors and refine the interface to the point where we believe it provides everything our traders require at the click of a mouse.

Stay tuned for more updates to come in the near future.

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Fibonacci retracement levels as a profitable tool

When used correctly, Fibonacci is a very profitable tool for a Forex trading.

We can employ retracement levels or extension zones by looking at the Fibonacci magic ratios. The retracement levels are essentially the levels in which we anticipate the Forex market will retrace.

The retracement key zones are the 38.2 %, the 61.8 %, and the 78.6 % at a specific point before the trend will continue in a certain direction, whether it be in an uptrend or a downtrend. In some instances, we should expect the Forex market to retrace pull back to these other retracement zones.

Depending on the trend strength, the faster-paced trends may only retrace to the 38.2 level. The majority will retrace to a sweet spot between the 61.8 and 78,6 before continuing in its overall direction.

The -27 % level or the -61.8 % level will make up the extension zones, or target zones. In a trend Fibonacci retracement foundation, these zones are the targets to which we will look to trade.

Due to its nature of working with trends, Fibonacci will be visible on all timeframes, although we believe it will be considerably stronger on the weekly or daily timeframes, which will suit a swing trading strategy. We do not recommend using retracement tools on timeframes smaller than 1 hour because they are less effective.

Fibonacci retracement foundations

Direction Fibonacci retracement foundations are used to determine where the Forex market can retrace and then extend within a certain range or trend. Fibonacci is a fantastic tool for building trading setups based on confluences.

They function well with various trading tools and technical indicators. They can be repeated indefinitely until the trend changes, then repeated several times into the new trend.

In certain situations, we may look for a pullback to the 38.2% level in stronger trends, or we may aim for a pullback to the 61.8% level, which is the Fibonacci golden ratio. The golden area between 61.8% and 78.6% is where we should be searching for most of our trade setups.

Then, within the overall trend direction, we can conduct trades to extend our Fibonacci target extension confluences. The extension confluences are essentially where we look to target or trade, and they should be used within a chart and other tools to locate the optimal target to come out and exit the trade closed.

Extension confluences

When deciding to exit a trade, we should look to the left over significant levels of support and resistance to determine where the market has been and whether that level is a critical level within the market. Always round to the next key level or psychological zone when calculating a level.

Basic trendlines are another important tool for finding trades at those extension levels. The Forex market will frequently break out of minor counter trendlines printed within the Fibonacci retracement zone. After that, you’ll break out towards extension level -27.

Fibonacci in motion

In order to get the strongest levels to actually trade to Fibonacci in motion, we need to utilise the price action around it. Look to the left for previous Forex market structure and use support and resistance levels to develop logic. Especially the psychological critical levels that are rounded require analysis. Depending on the trend and volume, we can then try to establish more confluences.

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Choosing your main Forex trading strategy and trading range

Defining your plan on how you will trade your account is important. You should have most of your ideas and blueprint mapped out before you begin your trading sessions to avoid emotions coming into play.

The main Forex trading strategies consist of:

• Swing trading
• Day trading
• Scalp trading
• News/Fundamental trading

Each Forex trading strategy has its own characteristics that will not suit all Forex traders. For starters, each Forex trading technique has a time component, and short-term methods won’t work if you can’t be behind the screens for large periods of the day. Profitable approaches and styles must be adapted to your plan and how you envision it working.

We all have different styles, and how we behave outside of the trading room reflects on our Forex trading performance. This is due to the fact that we are all human beings with feelings. It will be more difficult to succeed in Forex trading if we are emotionally involved.

The simplest way to overcome this is to trade with quantities that will not affect you if you lose. Then we can concentrate on improving ourselves and expanding our skill sets by using our Forex trading techniques.

Continually striving to improve your Forex trading strategy, regardless of your situation, will benefit the Forex trading strategy you develop over time. Not all Forex traders fit into a box and we are all different.

What Forex trading strategy is best for me?

What Forex trading strategies would perform best for you will be determined by how much time you have to devote to your work. If you have other life priorities such as a job, then swing or position trading might be the best approach. If you have a lot more time to devote to your craft, you could consider trying day trading to see if it fits your investment personality and character.

Forex traders should test new techniques on a demo account and start small. Always strive to obtain the right to trade Forex for a larger sum of money. You can test the waters by starting small and seeing how well you can build a solid performance across a large number of trades.

Useful Forex trading strategy books

In previous blog posts, we have displayed some of our books that we recommend traders read. Here are a few that will help with your Forex trading strategy:

• Market Wizards by Jack Schwager.
• Reminiscences of a stock operator by Edwin Lefevre.
• Trading in the zone by Mark Douglas.

These books cover a wide range of technical Forex trading strategies, including how to trade and when to trade. While you may encounter other Forex traders online that claim to be profitable based on a small sample size, don’t be fooled into trying to make quick money or trade too aggressively by overleveraging your account. When you’ve discovered or established your Forex trading strategy, you’ll know since it will make your life easier and more sustainable.

Most popular prop trading strategies

As we have analysed hundreds of prop trading strategies of the past year, we have understood similar habits across different trading styles and trading strategies. Across all trades, all profitable Forex traders will have positive risk-to-reward ratios. The best performing Forex traders seem to be all-round traders, with trades lasting from as little as 30 minutes up to 3 days. Some have also leveraged high-impact news to push their accounts toward profit goals. The beauty of our prop fund is that we welcome new Forex traders with open arms and are always on the lookout for new varieties and styles of traders that come through our fund.

After speaking with a few Forex traders recently, they discussed the 80-20 rule, which states that they devote 80% of their time to technical analysis and 20% to fundamental developments. This combination appears to be particularly effective in forming long-term successful behaviours. We’ve examined volume drives before, and if a trade has a multitude of confluences in one place, the news can assist drive momentum there.

Back test some of the methods you think would work for your lifestyle by doing some research and figuring out your accessible trading times. Then, after it’s working, progressively deploy it on your live account with minimal risk.

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