The Importance of Obtaining the Bigger Picture
Instructor's Response:Based on only this segment of the EURUSD 2 hour chart you have the right idea.However, before we make any trade we must consult the Daily chart to determine the overriding direction in which the pair has been trading.Take a look at the Daily chart below and we can see the trend has been to the downside since around the first of December. Based on this we would only want to be looking for opportunities to short the pair.In this instance on this EURUSD pair we would wait for the pair to complete its retracement to the upside and stall. Then, when it begins its move back in the direction of the dominant trend, we would short the pair with a stop above the highest level of the retracement.I have highlighted the section on the Daily chart that shows the same area on the entire 2 hour chart that was posted. By looking at those two charts we can see the danger in not getting the bigger picture by looking at a Daily chart.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.