The EUR/JPY is one of the most volatile pairs in the forex market. Due to its relatively high volatility, it’s extremely hard to trade with the traditional forex trading strategies. Professional traders have developed a unique way to trade this pair in the daily chart with the high percentage of winning trade. Traders simply use trendline and chart pattern techniques associated with RSI indicator to trade this pair.
EUR/JPY Daily Chart
Figure: Trading EUR/JPY pair with trend line and RSI indicator
In the above figure, a valid trend line is drawn for trading this EUR/JPY pair. A valid trend line consists of three points at least. The point A, B, and C are three connection point of the trend lien line. When the price reaches the trend line for the fourth time trader waits for price action confirmation pattern. And overbought RSI with bearish candle stick formation triggers the sell signal.
Trading condition and entry signal
- The first condition for trading the pair with this strategy is to identify the prevailing trend of the pair.
- Trader draws valid trend line after successful identification of the prevailing trend of the pair. A valid trend line should consist of three points at least. However, advanced professional trader sometimes considers two points for considering it to be a valid trend line.
- Depending on the trader experience and knowledge trader will look for sell candlestick formation pattern in the case of down trend and for uptrend they will look for bullish confirmation candlestick pattern.
- Once all the parameter are well-set trader look at the RSI to see the oversold and overbought condition of the pair.
- Trader put their stop loss just above the bearish trend line for sell signal and for buy signal they set their stop loss just below the bullish trend line.
- Proper money management system should be followed while trading this trend line strategy.