Forex Daily Ranges
As those who read this blog know, one of my main trading methods is selling resistance and buying support. This is usually based on the Pivot points, price congestion, Fibonacci numbers and trend lines. Particularly as these converge and form an area where all are true.
I've never really discussed the use of daily currency range, as I've always used it sub consciously but never really paid much attention to it.
The idea is that currencies trade in pretty similar ranges every day. They will move move from the top to the bottom or the other way round and one can take some low risk trades based on the ranges. The reason I say they are low risk, is that if a currency starts moving out of it's average range, then our trade is longer valid and we can get out fast. Basically, a counter trend trade is taken when the range is hit, it's always best to try and get it when it coincides with another important price (Pivots, Supports, Fibs etc), however it is not critical to this currency ranges method.
Let's take a look at GBP/USD on 04/15/2010. The average range for GBP has been around 130 pips recently, and it is natural for the Pound to make that round trip almost every day. (You can add an ATR (7) or longer if you wish to the daily chart and work out the daily range for yourself, as it keeps changing depending on volatility.) At 06:45 GMT GBP was at 1.5520 and 10:00 GMT spiked down to 1.5384, that covers 136 pips, just about the daily range for the currency. At that point you could have taken a long GBP position with say 15 pips stop, as any move beyond that would break the range and we are outside of familiar price patterns. My target profits would be at 38.2 50 and 76.4 Fibonacci points and I would exit in thirds. (This is a trade I took yesterday btw). So take a look at the chart below and see how it panned out. This is a very low risk strategy and one that can be applied every day. I would add though, that it is best to time the entry when volumes are normal and not during thin volume periods. (See article about timing and time Here). If you join my Facebook page, I usually call these trades when I make them, Facebook Page Here.
Delphi Scalping method
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