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Wednesday, September 14, 2016

Summer Ranges Maybe Over Soon

It is no big secret that price action during summers tend to be range bound rather than trend driven. This summer was no exception. Major currencies as well as crosses were range bound. gbp/usd has been in 700 pip range (not a small one) since July, result of post Brexit consolidation after a huge collapse. As we have BOE coming out with interest rate decision tomorrow we may see the pair consolidate around 1.3100 area. Next week FED interest rate decision may send gbp/usd either back to support of 1.2800 or to 1.3500 and beyond that to 1.4000 or even 1.5000 level. 

eur/usd, on the other hand stayed in much smaller range of about 500 pips, July and August range being only 400 pips. After FED releases its’ interest rate decision the pair will most likely gain direction and either drop to 1.0500 or rise to 1.1700. The most likely scenario is that it will revisit the lows of 1.0500 before going upwards. A rare, but a possible case would be for the pair to keep dropping and reaching 2000 lows of 0.8200. That would have made a full bullish and bearish cycle of eur/usd. Seven years of rise and seven years of going back to the exact spot where Euro started its’ ascend.
Easy markets

If we look at the gold chart we can also see that it has been caged in a range for a number of months. One thing is clear that the commodity is in an uptrend after correcting downwards for a few years. At the moment, technical analysts and traders can spot a bullish flag forming on 8 hour and a daily chart, meaning that we may see a breakout upwards sooner rather than later. 

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Friday, March 18, 2016

Big Moves After Narrowing Range

Markets have a few distinctive states that they fall into and stay till other state develops. One of the most popular ones is a range. Traders take advantage of that by trading support and resistance in a range. One of the best patterns in a range is a narrowing range. It may come in the form of a triangle or a rectangle. It will always end in a strong move. One can use it to make nice cash by simply placing buy stop orders above the most recent high and a sell stop below the most recent low. 

The example below of eur/usd pair clearly shows that. You may see how the pair went into a range mode after a strong move and in a period of three days stayed in a range. A catalyst for the breakout upwards occurred this Wednesday when FED came out with interest rate decision. US dollar collapsed across the board. The rally netted around 200 pips and the amount may increase if the pair keeps on rising the last day of the week. 

Remember, narrowing range is a good opportunity to take breakout trades and make a lot of pips as a result.
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Wednesday, August 12, 2015

Gold to go higher

It is obvious that gold has been battered in the last couple of months. However, most recent price action suggests that gold may rebound in the nearest future. In fact, the recovery has already started. I want you to look at the chart below to see for yourself. From 20th of July to 10th of August, 2015 gold has been in bottoming process. The last low on the 20th of July was quickly rejected as price crashed dramatically and then rose suddenly. 

In the next couple of weeks a process that traders call “accumulation process” occurred. You can see how price tried to test previous lows on at least 5 separate occasions and failed. Each time buying pressure came and price rose. On the other hand, price was also rejected at resistance. You can see how the range was “squeezed” during these couple of weeks. Narrowing range is a strong indicator that a break will occur sooner rather than later. It often presents the best opportunities for trading a breakout.

Most breaks fail and I would strongly advise against trading them. However, when you see a narrowing range it is one of those rare situations when breaks turn out to be true rather than false. This type of situation happened on the 10th of August when price eventually broke the narrowing range and now is rising up in waves. 

Just by measuring the base of the narrowing range pattern I assume that the minimum target for the move is around 1143 level (classical technical analysis count). Of course, price may go well beyond that and it is really difficult to say where exactly the rise will be over. However, a technical trader would at least try for the minimum target. Buying on dips seems to be the best strategy now if initial “buy on a break” strategy was not implemented. 

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Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.