It seems like everybody is talking about shorting the Euro this week. From Forex blogs to Forex forums, the buzz is that EUR/USD is going down for the long haul.

So, should you short the Euro this week?

There are economic and technical reasons to short the Euro. If I had to pick a direction I would say EUR/USD is going down. However, I will not be selling as there is no clear signal on my charts.

But this is not about me. Who cares if I am going short, the question is should you short the Euro this week?

I cannot tell you if you should sell but I can show you why selling too early might be dangerous. Many people are saying that EUR/USD has broken support but EUR/USD is still stuck on support.

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Hey Guys,

This Sunday (2012-05-06) EUR/USD opened at 1.3011, 71 pips below last weeks close of 1.3082. This is the largest weekend gap on EUR/USD since November 25th 2011. Whenever the Forex market opens with a large gap I get a barrage of emails about gap trading in Forex.

The conventional wisdom in Forex is that gap trading is highly profitable and easy. In this post I take a look at just how reliable and easy gap trading is.

What Is Gap Trading?

Gaps are empty spaces between the close of one candle and the open of the next. In Forex gaps are not very common and they usually only occur at market open on Sundays. These gaps occur between a pairs close price on Friday and it’s open price on Sunday.

Stock and commodity traders have been exploiting gaps for decades. Since the stock market closes each day gaps are much more common. The concept behind gap trading is that price will always try to fill the gap. This may sound illogical but there are some logical reasons for price to fill gaps in the stock market. Generally when price gaps there is no support and resistance in the gap area. This means that price has free room to move inside the gap.
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EUR/USD 4hr Chart Analysis

EUR/USD Last Week

EUR/USD made some interesting moves last week. Unfortunately no proper reversal trades formed on the Daily, 8hr or 4hr charts so I took no trades on EUR/USD last week.

EUR/USD started the week between the 1.3265-1.3285 resistance area and the 1.3190-1.3210 support area. It ranged between those two areas until Tuesday when it broke the 1.3190-1.3210 support and tumbled down to our next support at 1.3120-1.3140. EUR/USD spent the next few days stuck on top of the 1.3120-1.3140 support area. The Bears didn’t seem able to break the 1.3120-1.3140 but the Bulls were not able to repel the Bears either.

On Friday the Bears eventually broke through the 1.3120-1.3140 support but it did not make it down to the next support at 1.3040-1.3060.

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Are you sick and tired of self-proclaimed trading experts (internet marketers) telling you how easy it is to make money from Forex?

You know that Forex is not easy.

The problem is that most sites wont tell you how hard Forex can be. In fact most sites say Forex is easy. Most Forex websites do not tell you the truth about Forex.

So……. I will tell you.
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1. Use Support and Resistance

Support and Resistance is one of those things that all newbie traders hear about but few use properly. I believe that all traders should place Support and Resistance areas on their chart. It doesn’t matter what system or method you trade, even if you trade EA’s, Support and Resistance is vital.

Support and Resistance areas tell you precisely where price most likely stall or bounce. Traders strive to achieve even the slightest bit of insight into what price will do in the future. Support and Resistance areas give you that insight. Just check out the chart below and see how accurately price reacts to the highlighted Support and Resistance areas.

Whatever trading strategy use the insight that Support and Resistance gives you can help make you more profitable. So start placing these areas on your chart. Check out the Forex Strategy section to see how I place my Support and Resistance areas.
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Trading the daily charts is really good for people who do not have much time to sit and watch their charts closely. Daily charts usually mark the point at which a trader switches from intraday trading to long term trading. Although some trades opened on a daily chart can be wrapped up in under 24 hours many trades last several days. Either way daily charts do not require much monitoring, you do not need to check them as often as you would 1hr charts or even 4hr charts.

The great thing about my trading strategy is that it can be adapted to trade any time frame. I trade pure price action and I keep it as simple as possible. So switching from 1hr to weekly charts is dead simple when your method is based only on price analysis.

If you have been following my weekly analysis lately you will have noticed that I am constantly on the lookout for ranges because a good range means good reversal trades. Finding a good range on a 4hr charts usually results in 2-4 reversal trades at an average of 40 pips per trade which results in 80-160 pips.
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