I wish there is an easy answer that we can come up with. Like a special report titled “the 20 attributes of EUR/USD” or something alike. But the matter of the fact is there isn’t a simple answer for this question. But then the key to understanding the market lies within the principles, not the actual answer itself.
Let me explain…
Every currency pair moves differently. Every single pair has its own personality, or in this case, their own daily ranges, support/resistance levels, and/or market shares. The key to become a successful trader is to understand and trade only a few currency pairs that you feel comfortable with.
When we look at the chart of a currency pair, we can see the history of HOW does the particular currency pair moves, and when we start to look at the same chart in a longer time compressions, such as the 4H to the Weekly charts, we can see HOW it moves in a longer term. However, this still does not answer HOW it moves, but only shows you how it moved in the past.
The best exercise to understand how a particular currency pair moves is to do a scalping exercise. Get out a sheet of paper and start looking at only one currency pair, EUR/USD for example, and use only a simple candlestick chart or just by looking at the prices, then try to enter 100 trades going for 30 pips of profit with 30 pips of stop loss. In about a week’s time, you should have developed some kind of understanding to EUR/USD. You’ll learn to see that:
• Usually a bullish day will be followed by a bearish day. (If you have an extreme bullish day, then the next day you might see extreme retracement or continuation of bullish momentum, vice versa)
• Movements are usually retraced around 7:30am and 11:30am NY Time.
• EUR/USD usually moves within a range of about 1% its current value.
• Certain price points, such as 50 and 00, tend to support or resist market continuation.
Every currency pair differs from the other; for example, GBP/USD tends to make major moves then retraces up to 70% of its move, whereas EUR/USD might only retrace a small portion in comparison. The key to become a successful Forex trader is to learn your currency, learn to spot its characteristics and use them to your advantage. This “feeling” that you develop will give you an edge in trading.