Forex traders are normally spoilt by incredible trending markets
but recent volatility and uncertainty has meant that traditional trend
following systems have been underperforming and smart Forex traders have
had to find alternative ways to profit from the markets. Today we'll
take a close look at what is working as a solid trading strategy and
what you should be keeping an eye on going forward.
Forex markets typically trend very well under 'normal' market conditions and allow an element of predictability. With the current Euro Zone crisis, Greek and French elections, we've seen a shift away from trending markets and a move to volatile, choppy markets. This has made life a little more challenging for many Forex traders but also opens the door to opportunity for nimble traders.
The EUR/USD was range bound from February to May this year and trend followers would have been chopped in and out of the markets, whereas range bound system traders were able to buy weakness and sell strength and profit in between. There is nothing worse than getting consistently chopped in and out of the market. It's a lot of hard work for little to know reward.
Using Oscillators like the Stochastic
Ideally you'll want to get to know your oscillators like the stochastic, RSI and Bollinger Band indicators which are brilliant at looking for overbought and oversold markets. The beauty of becoming proficient in these tools is that they can be applied across all time frames, from 5 minute, hourly and daily charts. Smart traders will always have multiple trading systems including trending, range bound and volatile breakout style systems.
As a trader you have to be flexible in the current market environment if you are to survive and thrive. Those who understand the different styles of markets and have trading systems and methodologies for each market type will prosper, no matter what the Euro Zone, G20 meeting or Ben Bernanke have to say.
Your Goals
So your goal as a trader is to control what systems you are trading and how you implement them into the market. You should never let your emotions be controlled by what is happening in the market but instead you should keep an open mind and understand that one of the 3 types of trading systems will be working. Are you going to be using your range bound systems? Trending systems? Or perhaps your volatile breakout style systems. In time you should be looking to build systems across each style of market and they'll dictate when they are active or not.
Forex markets typically trend very well under 'normal' market conditions and allow an element of predictability. With the current Euro Zone crisis, Greek and French elections, we've seen a shift away from trending markets and a move to volatile, choppy markets. This has made life a little more challenging for many Forex traders but also opens the door to opportunity for nimble traders.
The EUR/USD was range bound from February to May this year and trend followers would have been chopped in and out of the markets, whereas range bound system traders were able to buy weakness and sell strength and profit in between. There is nothing worse than getting consistently chopped in and out of the market. It's a lot of hard work for little to know reward.
Using Oscillators like the Stochastic
Ideally you'll want to get to know your oscillators like the stochastic, RSI and Bollinger Band indicators which are brilliant at looking for overbought and oversold markets. The beauty of becoming proficient in these tools is that they can be applied across all time frames, from 5 minute, hourly and daily charts. Smart traders will always have multiple trading systems including trending, range bound and volatile breakout style systems.
As a trader you have to be flexible in the current market environment if you are to survive and thrive. Those who understand the different styles of markets and have trading systems and methodologies for each market type will prosper, no matter what the Euro Zone, G20 meeting or Ben Bernanke have to say.
Your Goals
So your goal as a trader is to control what systems you are trading and how you implement them into the market. You should never let your emotions be controlled by what is happening in the market but instead you should keep an open mind and understand that one of the 3 types of trading systems will be working. Are you going to be using your range bound systems? Trending systems? Or perhaps your volatile breakout style systems. In time you should be looking to build systems across each style of market and they'll dictate when they are active or not.
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Article Source:
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