Market Outlook: EUR/USD is currently influenced by a dominant weekly supply zone, suggesting significant resistance and bearish pressure over the longer term. The daily timeframe confirms a downtrend, reinforcing the overall bearish sentiment on the pair.
Setup and Entry:
- Timeframes: Weekly, Daily, and 4-hour - Setup: A sell limit order is placed at the 4-hour supply zone, which is nested within a larger daily supply area. This approach anticipates a retracement to this zone before potential continuation of the downtrend. - Analysis: Given the prevailing weekly supply zone and the confirmed daily downtrend, the sell limit order allows traders to enter at a predetermined price point within the supply zone. - Entry Strategy: Set the sell limit order slightly below the upper boundary of the 4-hour supply zone. This strategy requires price to move up into the zone, triggering the entry before potential continuation of the downtrend.
Risk Management:
- Stop-Loss: Place the stop-loss above the highest point of the 4-hour supply zone or based on your risk management strategy to limit potential losses if price reverses. - Take-Profit: Target a 1:3 risk-to-reward ratio, setting the take-profit level three times the distance of your stop-loss from your entry point.
Example: - If your stop-loss is set at 40 pips above the entry point, aim for a take-profit 120 pips below the entry point.
Summary: EUR/USD's current market conditions support a sell limit order at the 4-hour supply zone, aligning with the broader weekly and daily bearish outlook. Implementing effective risk management and aiming for a favorable risk-to-reward ratio enhances the trading strategy. Adapt your approach based on real-time market movements and individual trading preferences to optimize trade execution.
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