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.If you want to trade patterns like these I recommend opening anaccount with Etoro and start trading. Good luck.