Recently, the euro/U.S. dollar pair saw a big reversal signal in its charts, and that has led to the euro going up and the dollar going down in value. This has come after a prolonged rise in the value of the dollar, which has been going on at the same time as the U.S. stock markets have been in chaos. This trend is usual, and now that stock markets are going up again, it’s only natural that the dollar will start to decline again. But with uncertainty still going on, who knows how long this will last.
The particular signal, called a morning star, is an indicator that a change in the overall trend is about to occur. And in this instance, it is a bullish reversal, so there is a strong possibility that the euro will keep going up for the near future. For those looking to take a long position on the euro, this is good news, and it announces a good entry point for traders to look to. It takes place on candlestick charts, and has a reputation for being very accurate in these instances.
Using candlestick charts to help with your Forex trading is a great idea because they are such an accurate technical indicator. The effect may be purely psychological, but in the end it really doesn’t matter. Changes that take place because of trader psychology are still changes, and you can profit off of them in the same way as fundamental based price changes.
The one issue that many people have with following candlestick chart changes is that while they are accurate at their core, the length of time that the change last for is often difficult to predict. A bullish morning star might lead to a prolonged trend change for days, or just a couple hours. It’s really tough to tell when you are just examining things on a short term scale, such as with a single day chart. The best way to take advantage of this is to make sure that you are taking an ultra short term approach. For most people, this isn’t going to be profitable without taking on a large amount of leverage. The downside of this is that you are taking on a lot more risk this way, which could lead to big losses in the event that prices don’t go your way. Even with strong indicators, this is always a possibility. The other way to take advantage of short term price changes with less risk and high profit rates is through binary options trading. They are easy because the timeframe is stipulated before you begin, so if you want to keep your trade open for 2 hours, you can. Or, you can keep your trade open for as short as 30 to 60 seconds, too. Either way, you are given control of this before you begin as a sort of safety valve so that you are not taking on too much risk and human error during the trade is eliminated.
The good news for longer term traders is that this signal appeared on a long term chart, which looks at EUR/USD over the course of the past year. For short term traders, it’s tough to tell what the best path of action is, but a long term change needs to start at the short term, so paying attention to the charts and any sort of announcement or governmental action that comes out will be helpful as these things will influence prices, too. Fundamental changes are always strong and can often trump technical indicators, no matter how strong they might be.