In this article, I am going to look at some trading set ups which are easy to spot and show you how to trade them for profit. Let's take a look at trading price action, with some simple set ups in more detail and look at the logic of why they work.
Here I am going to look at 3 simple set ups which can make any trader huge profits and you will see them occur frequently and they offer you fantastic profit potential with low risk.
1. Trading a Switch from Low Volatility to High Volatility
Currency markets are volatile but not all the time and you will often see a currency pair trade in tight ranges for a few days to a few weeks but this never lies for long, as soon as the currency becomes more volatile – go with the direction volatility is taking you.
A great chart set up is the symmetrical triangle, were volatility drops and the triangle becomes narrows and wait for a break from it. You will see this chart formation a lot and it's one of the most reliable ones to trade.
The logic behind the switch is the supply and demand equation which was in balance has now changed and the way to go is with the break either to the upside or downside. Once you get a switch from low to high volatility, chances are the new trend will continue.
2. Bull Market Reversal Day
A bull market reversal is when a currency has been in a bull trend and you suddenly get a reversal – the market makes a new high and settles below the previous days low. Do not trade until the next day just in case traders come in to buy the dip. Instead until the open of the next day and see if prices are down and if they are – get short.
The logic behind this trade is – the buying power is over after the market makes a new high and if it opens lower the next day, weak speculators will be hit on stop which will lead to accelerated selling.
3. The Breakout no One Agrees With
Sometimes you will see a price break through a critical level of resistance and there seems to be no reason for it in the news and the news and all other traders are bearish. If you ever see a break of major resistance when no one agrees, buy the break and it will probably develop into a fantastic trend.
Over 90% of traders lose – so if they do not agree with the break, there is probably wrong and its time to get on board. The largest and best trends, very often come out of here and this has been so through trading history. So do not worry why the break is occurring – just trade it for profit.
The above are three simple set ups anyone can spot and anyone can trade for profit, by just looking at price action sure, there simple but they will make you a lot of money.