These are time tested and high probability Forex trading setups, if you really want to make some money, you need to read what I have to share here.
The UK morning Forex Trade: during the London open the European markets usually have wild swings. It’s not uncommon for currency prices to move a couple hundred pips (up or down) in a matter of hours.
In order to execute this trade successfully, you should have good technical analysis skills, because you need to use support and resistance levels as well as drawing Fibonacci levels. If you know the Elliott Wave theory, much better.
You need to have all your tools and systems ready half an hour before the London market opens. This setup does not occur every single day, but when it does, your profit should be very decent. First, you need to identify the trend. If there’s a strong trend in play, then you will likely be trading on the day, otherwise don’t force the trade.
You’ll know whether there’s a trend or not simply by looking at the most recent three swings. If those swings consistently make higher highs and higher lows, then you have an uptrend. If the swings consistently make lower lows and lower highs, then you have a downtrend.
Once you know the direction of the trend, you’re good to trade. This Forex setup is based on trading the continuation of the trend, so if you have confirmed an uptrend you should only take long positions, and vice versa. Now, use the Fibonacci drawing tool to plot out the Fibonacci levels for the previous swing, and enter at the 61.8% retracement level in the direction of the trend. Your stop loss should be placed beyond the 100% level, and use this risk to calculate your optimal position size for whatever money management strategy that you are applying.
Once the trade is on, I like to ride the trend and see where it goes instead of using targets. My typical exit strategy will be to see what happens when the price reaches the previous swing’s extreme point, which will play out either one of these two scenarios: either the price will test the previous swing extreme and then bounce back, or the price will test the previous wing extreme and cut through it like a hot knife through butter.
When the price reaches the previous swing’s extreme, I normally move my stop loss to the entry point to eliminate the. Once the price is around this extreme area, it will quickly become very obvious which way it is going to go. If you’re uncertain, you can just take 50% of your initial position off at this point and then leave the remainder to stop out or continue with the trend. Once the price goes beyond the prior swing, then all I do is to wait for a new extreme point to be formed, draw my new Fibonacci levels and move the stop loss to be at the 38.2% level. This is a simple yet powerful trading setup, make no mistake, if you follow the plan correctly, you will reap the rewards of you efforts.