Range of the Day

Forex pairs tend to trade within a range during a 24-hour day. Here’s an example of how to use this knowledge.  

Here’s a 10-minute chart of the EURUSD beginning about midnight of December 11, 2013. It covers slightly more than one day. The lowest price on the chart is about 1.3740. The highest is 1.3810. The last bar on the chart is about 1.3800. The latest time on the chart is about midnight, 12/12/13.

Questions:

Is this a good place to buy, or short, or neither?

If you buy, what is your profit target? How far up do you expect the price to go?

If you short, what is your profit target? How far down do expect the price to go?

My analysis: Based on the chart above, I’d expect the price to go a bit higher and then reverse. I would expect it to pause or even bounce off 1.3765. And I would expect it to reach the vicinity of 1.3740 within a day.

Here’s the same chart about 2:00 AM on December 12, 2013. As I expected, the price went a bit higher, and then headed down. It is now at 1.3763 (about where I said). I said it could pause or bounce from there, and eventually go to the vicinity of 1.3740. Let’s see what happens.

The price did bounce off the 1.3763 level and popped up to about 1.3790. Then it resumed the downward plunge, and sure enough, it reached 1.3740, about 11:00 AM.

What’s next? At this point, we can ask the same questions as at the beginning?

Buy, short, or do nothing?

If you buy or short, where are your targets?

Your analysis???

Here’s the chart as I write this. The price has moved up from the 1.3740 bottom, and we’ll see where it goes from here.