Article Summary: The EURCAD has advanced over 572 pips for the month of April. Today we will review market momentum and its potential for future scalping positions.
Finding currency pairs to scalp can be a difficult proposition. Traders normally look for pairs with strong trends, with enough market moment to push price in one specific direction. Today we will review how to identify a specific pair to trade using trend and momentum analysis. Let’s get started by look at an example using the EURCAD.
Below we can see a 4Hour chart of the EURCAD which will be used to help find our current market trend. For the month of April the EURCAD has already advanced as much as 572 pips. As the pair continues its advance, traders wanting to use the trend can continue to take new buy positions. However, before any new orders are put into play, traders will question if short term pricing is moving in the direction of the trend.
Learn Forex – EURCAD 4HR Trend
(Created using FXCM’s Marketscope 2.0 charts)
EURCAD Building Blocks
After identifying the trend, a scalper’s next step is to identify short term momentum. This step is taken to avoid counter trend reversals all while identifying key technical levels for trading. Below we will find a 30 minute chart of the EURCAD. The graph has been divided into two separate compartments to isolate market momentum. The key to momentum analysis is to ensure that price for both blocks is heading in the same direction.
To begin our chart blocking, we need to identify a starting point on the graph. Block 1 has been created by identifying price movements from Sunday the 14th through Wednesday the 17th. Pictured below we can see during this time frame the EURCAD advanced over 208 pips. Block 2 also shows a continuation of our uptrend, as price again moved to a higher high at 1.3478. With both blocks creating higher highs this ensures that momentum is still heading in the direction of the primary trend.
Learn Forex – EURCAD Building Blocks
(Created using FXCM’s Marketscope 2.0 charts)
With both building blocks confirming upward momentum in the direction of the trend, traders can look to continue scalping the EURCAD with the start of next week’s trading. One key level scalpers should monitor is the current the Block 2 low at 1.3351 displayed above. If this line of support collapses, traders should take this as a signal that our standing uptrend may be at an end
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---Written by Walker England, Trading Instructor
To contact Walker, email instructor@dailyfx.com. Follow me on Twitter at @WEnglandFX.
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