A few months ago I presented on trading low volatility forex markets. A major takeaway is that because profit expectations are lower, preserving reward to risk ratios means placing tighter stop loss orders on trades. Today I'm looking at a set up in AUD/USD that reflects that shift in trading style.
On the daily chart, there is a clearly defined trading range:
At some stage, the pair will break from this range. However, until it does, I'm range trading. As AUD/USD is towards the bottom of the range, I'm looking for buy set ups on lower time frame charts. The 4 hour chart looks like this:Trading into the close on Friday night (Saturday morning) the pair appeared to reject the lower levels around 0.9240. In trading this morning, it's clinging to the previous support at 0.9276. Keeping it simple, a move up beyond the recent high point at 0.9288 is my trigger to trade. A stop loss at 0.9270 and a target at 0.9360 gives a reward to risk ratio of 70 pips/ 20 pips, or 3.5 to 1.