September 28, 2010
The Current Trading Range Of The GBP/USD And EUR/USD Pairs
Today I just want to make an interesting point about the GBP/USD and EUR/USD pairs. I've had quite a few emails in recent weeks from people who have complained about just how hard it is to make money at the moment, and drawing attention to the GBP/USD pair in particular. So why is this pair so hard to trade at the moment?
Well I think one of the main reasons is simply because the Average True Range indicator, which gives you a rough indication of the average daily trading range of this pair, is currently a mere 115 points. This puts it on a par with the EUR/USD which coincidentally also has a trading range of 115 points at the moment.
Now you may think that this is more than enough movement to generate consistent profits on a daily basis, but when the price has already traded within a trading range of say 70-80 points before the London market has even opened, which is not unusual, it becomes very difficult to squeeze out a profit.
It's certainly a lot harder than it used to be. To demonstrate this point you only have to go back in time to a post I made in March 2009:
These figures were taken from 2008 and as you can see the average daily range for the GBP/USD and EUR/USD pairs were 222 and 177 points respectively. So compared to today's 115 point trading range for both of these pairs, that is a huge difference. Even a few months ago the trading range was around 180-200 points, but it has slowly been drifting downwards all the time, making it harder and harder for anyone who day trades the markets.
It's a similar story on the GBP/JPY pair as well. In fact the fall is even more magnified here because back in 2008 the average daily trading range was a whopping 348 points, but it currently stands at just 134 points.
So market conditions are not exactly ideal for day trading at the moment, although there are obviously still plenty of decent trading opportunities on the longer time frames.