Some experts are expecting the euro to back off its growth in the coming weeks, especially in comparison to the U.S. dollar. Over the last two weeks, the euro has become stronger against the USD, leading to a decline in European stock prices. For those making economic policy decision in the Eurozone, this has been quite frustrating as the European market was beginning to show signs of recovery. The strong euro has hurt this a bit, so a declining euro right now would be seen to be quite beneficial here.
The stipulation that these experts are quick to point out right after this is that the euro isn’t expected to fall by very much. For small Forex based traders, this means very little in the way of profits, unfortunately. Binary options traders can make much more in a setting like this, especially because of the fact that most brokers will pay a higher rate for the EUR/USD pair simply because it is so popular. We can see by this opinion that the overall trend is likely to reverse, with the euro losing and the dollar gaining, now it’s a matter of timing trades correctly and selecting the right expiries so that put options here have a high success rate. Taking out puts of various length can also help. If your broker offers weeklong or two week long trades, these can help supplement your short term earnings and add an extra element of conservative stability and risk management.
The above argument rests on the fact that the euro is most likely overbought right now, and a majority of traders seem to have a net-short sentiment, feeling that the euro is weak and that its price cannot maintain the levels it is currently seeing. This is a tough thing to estimate, but if you look at recent volume levels and sentiment, we can get a decent picture of what’s truly going on, and the euro is overbought by these standards.
Don’t be surprised if the euro just trades sideways for a while, though. There’s a lot going on in the next couple weeks when it comes to economic events, and when something like this happens,
a currency pair can easily become range bound. This creates its own type of trading conditions, which can be used to make money, too. However, it’s a very different method from what’s described above, and taking out long term positions will not be beneficial to you if the pair does become range bound. You will want to focus on very short term trades, usually no more than 10 to 15 minutes in length. The goal here is to identify resistance and support levels, wait for the pair to approach these, and then take out the appropriate position. If it’s at the top of the chart near the resistance line, act with a put. At the bottom, near the support line, act with a call option. There will likely be a higher rate of incorrect trades with this method as is the nature of ultrashort term trading, but because of the greatly increased frequency of your trades, you will be able to still turn out a profit, especially if you can keep your correct trade rate above 65 percent and find a return of 79 percent or higher. Again, this is not a time when you want to be focusing in the Forex market, but rather stick to binary options, simply because a narrow range does not give you enough wiggle room to succeed with Forex trading unless you take on an excessive amount of leverage, and this can drastically increase your risk if you are not careful.