Trading Early
The clue to finding a simple strategy is to look for one you can comprehend and that you can put to the test right away. Complicated methods may demand more of your time and efforts. To make the most out of the market, a trader must be able to spot an early move when the currency begins to establish a new direction for the day.
As you may be aware, the Frankfurt market operates from 2:00 am EST and an hour after that, the London market opens. Many seasoned traders begin their day by studying the 1 hour time frame with their favorite currency pair. At this particular moment they have no indicators in place. They generally focus on the prices reflected between 1:00 and 2:00 a.m. They try to identify support and resistance within that range and draw parallel lines through the highest highs and lowest lows in order to design a tunnel.
Following this step, what they do is move onto the smaller time frames i.e. a 5 minutes time chart. They then implement the use of candlesticks and watch for a candle to close outside of the tunnel. Once they see that the candle next to it opens up, they figure it’s time to enter into a position. Note that these Forex traders usually place their trades and immediately set the stop at 20 pips, while aiming for a profit of at least 20-30 pips. This, they say, is a set-up for the momentum trader.