Traders who move over to the FX markets from stocks or futures usually find that the trending moves last longer in currencies than they do in most other financial markets. Trends in the FX market can last for years, giving traders who like to use technical analysis in their trading decisions plenty of opportunities to find quality trade setups. Here is an example of a classic buying opportunity in the EUR/GBP pair. The direction of the daily trend is up and we can see a pullback off of the highs down to about the 50% Fibonacci retracement level as the Slow Stochastics (default setting of 5,5,5) moves from below 20, which is considered oversold, to above 20 with a crossover. These textbook trade setups are found on daily charts with great frequency. However, most traders like to trade shorter term with more opportunities available to trade. So we recommend that traders use the hourly chart to find their trades, but to only trade in the direction of the trend on the daily chart. This gives active traders plenty of quality trading opportunities and at the same time keeps them on the momentum side of the market. Trading with the trend is what increases our chance of success in these markets, as it puts us a position to be in on some of the big moves that we typically see in the Spot FX market.

Attached Images