• 22 May 2024

How to Prepare for EUR/USD Rebounds and Breakouts During Market Overlaps

Trading EUR/USD during the London-New York overlap (12:00 PM to 4:00 PM GMT) can be highly profitable due to the increased volatility and liquidity. To capitalize on these opportunities, traders must be well-prepared for rebounds and breakouts.

Step-by-Step Guide:

1. Identify Key Support and Resistance Levels

  • 30 minutes before the overlap (11:30 AM GMT), identify key support and resistance levels for EUR/USD:

  • Historical Price Data: Look at the 4-hour and 1-hour charts to identify recent highs (resistance) and lows (support).

  • Technical Indicators: Use Moving Averages (MA) and Bollinger Bands to confirm these levels.

  • Psychological Levels: Round numbers (e.g., 1.0800) often act as psychological support or resistance levels.

    • Example:

Support Level: 1.0800

Resistance Level: 1.0900


2. Prepare for a Rebound

  • Confirm the Level: Check multiple timeframes (e.g., 15-minute and 5-minute charts) to ensure the levels are significant.

  • Watch for Price Action Signals: Look for candlestick patterns (e.g., hammer, and engulfing) near these levels, which indicate a potential reversal.

  • Volume Analysis: High volume near support/resistance levels can confirm the strength of the level.

  • Set Entry Points: Place buy orders just above support levels and sell orders just below resistance levels.

    • Example:

If EUR/USD approaches the 1.0800 support level and forms a hammer candlestick on the 15-minute chart with increased volume, this could signal a rebound. Place a buy order slightly above 1.0800.


3. Prepare for a Breakout

  • Monitor Consolidation: The price often consolidates before breakouts, forming patterns like triangles or flags.

  • Use Breakout Indicators: Indicators like the Relative Strength Index (RSI) can help identify breakout conditions. An RSI above 70 or below 30 can indicate overbought or oversold conditions.

  • Volume Confirmation: A breakout with high volume is more likely to be sustainable. Look for a volume surge as the price approaches key levels.

  • Set Entry Points: Place buy-stop orders above resistance and sell-stop orders below support to catch the breakout move.

    • Example:If EUR/USD consolidates between 1.0800 and 1.0900 and then breaks above 1.0900 with a surge in volume and RSI above 70, this indicates a breakout. Place a buy-stop order just above 1.0900.


4. Risk Management

  • Stop-Loss Orders: Set stop-loss orders below support levels for long positions and just above resistance levels for short positions to limit potential losses.

  • Position Sizing: Use proper position sizing to ensure that no single trade can significantly impact your trading account.

  • Risk-Reward Ratio: Aim for a favorable risk-reward ratio (e.g., 1:2 or higher) to ensure that potential profits outweigh potential losses. Always manage your risk to protect your capital!

    • Example:

If you buy EUR/USD at 1.0800, set a stop-loss at 1.0750 and a take-profit at 1.0850, ensuring a 1:2 risk-reward ratio.


Trading EUR/USD during the London-New York overlap offers significant opportunities due to market volatility and liquidity. Traders can maximize their profit potential by identifying key support and resistance levels, preparing for rebounds and breakouts, and managing risk effectively.


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