One way to trade the pair is to buy between 1.04 and 1.0350, with a stop loss just below 1.03. This assumes that 1.0316 on January 8 was the low for this swing, but still gives the trade a bit of extra room in case that area is retested.
This trade provides a greater than 4:1 reward-to-risk ratio, with the potential for 8:1 depending on the exact entry and profit target used. That sounds great, but there is the risk of being stopped out, possibly multiple times with this approach, if the bottoming process is choppy. The price may also not bottom out here and may instead bottom out at a lower level.
Another buying method is to wait for a reversal to occur. I would want to see a rally above 1. 05 , followed by a pullback and higher swing low. Once the swing low has occurred, I would watch for a move back to the upside ( ) in order to go long. A stop loss is placed below the low that just occurred. This too can provide for an attractive risk/reward since the target is still the 1.07 region but the stop loss/risk could be quite small. This is the example shown on the chart.
Small negative rollover on the long trade.
Disclosure: not trade currently
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