The strategy outlined here uses simple analysis of the daily ranges in a currency pair to set up an intraday trade in the direction of the trend established early in the New York forex trading session.
The strategy is based on three principles: 1) a market move has only two possible directions; 2) the market is in perpetual motion, and 3) the market completes certain trading ranges over certain periods of time (a day, a week, a month, or a year).
On a practical level, principle 1 means that whenever there is an existing market position with a certain profit target and protected by a stop-loss level, the market will eventually reach one of those trading points. It also implies that price action on the way between the two points is “market noise” and should be disregarded.
Principle 2 means that over any period of time the market is progressing either toward the target or the stop level and that one of these points will be reached within a reasonable period of time.
Principle 3 allows traders to evaluate the specific probabilities a market will reach certain price levels within a certain time frame.
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