EURUSD Provides Momentum For Forex Scalpers

Article Summary: The recent EURUSD advance has led to many day trading opportunities. Find out exactly why the EURUSD makes a great pair for scalping this week.

Each week scalpers must determine which pairs are appropriate for scalping. At times this may seem difficult but the process can be simplified when using a series of simple charting techniques. Today we will review how this is done by finding a strong trend the trend coupled with short term momentum. Lets look at this weeks example, using the EURUSD.

Below we can see the strong uptrend that has developed on the EURUSD. Over the past month we can see the pair advancing as much as 545 pips where it stands today. Also, it should be noted that the the pair is making a fresh montly high. As the market continues to make higher highs, trend traders will begin looking for opportunites to buy the EURUSD.

Learn Forex –EURUSD 4Hour Trend

(Created using FXCM’s Marketscope 2.0 charts)

Since there can be short term reversals in a trend, the next step taken is to identify short term market momentum. The best pairs for scalping have at least one week’s trading data moving in the direction of the primary trend. To confirm the optimal trading scenario for uptrends like the EURUSD, traders can employ a blocking methodology to their chart.

To begin our momentum analysis we will divide our graph into segments. Below we can see the EURUSD with the previous Wednesdays and Sundays pinpointed on our chart. In an uptrend, we should see an identifiable higher high in each of our pricing blocks in the direction of the trend. Also, traders should take the time to identify the Block 2 low on their graph. In the event that price breaks the previous low, which stands at 1.3176, scalpers should consider that short term momentum is ending and should seek another Forex pair to trade.

Learn Forex –EURUSD Building Blocks

(Created using FXCM’s Marketscope 2.0 charts)

Now that both trend and momentum have been identified, traders can then look to implement a variety of scalping techniques to enter into the market. Scalpers should always keep in mind that short term Forex trends can shift quickly. In the event that price begins to make higher highs, scalpers should always utilize a stop and look to exit losing positions as quickly as possible.

---Written by Walker England, Trading Instructor

To contact Walker, email instructor@dailyfx.com. Follow me on Twitter at @WEnglandFX.

To be added to Walker’s e-mail distribution list, CLICK HERE and enter in your email information

Looking for more information on risk management? Take our free risk management course and learn more about adding Risk/Reward levels to an existing strategy. Register HERE to start learning!