Choppy markets usually tend to be quite unpleasant, but why is that?
First of all, trades usually do not receive follow through and price action grinds away directionless with many ups and downs and unexpected twists.
Secondly, during these times most traders tend to see choppier equity curves in their trading, which could closely resemble the price action mentioned in the first point.
To be able to withstand the inevitable ups and downs, traders need strong stomachs or sturdy “sea legs” to wither the many spikes and rough waters. In these rough times traders need to remain focused on implementing their trading plan correctly and improving their plan when needed. Another method to get better sea legs is by choosing to diversify the strategies to be less dependent on a current strategy portfolio.
Jack and I discuss potential strategies that could reduce the risks when the market is lacking trends. One of the ways to go is using the 3 Parrots strategies which utilizes 4 hour charts. The other method could be scaling in and out on the lower time frames (5 min) on a 1 hour trend (but this needs more testing, please join our testing group).
When taking a look at today’s market I am interested of course to see whether the GBP can indeed strengthen against the USD and CAD, but in any case a substantial discount was obtained by waiting for the pullback as mentioned in yesterday’s DTT summary video.
Other pairs which catch my interest are the “commodity” pairs like AUDUSD and USDCAD.
Let’s start with the AUDUSD for instance. The AUDUSD has obviously been correcting downwards for a lengthy period of time, which is neatly indicated by the channel (orange).
However in the grand scheme of things, the channel remains suspiciously close to a bull flag. Considering the fact that price is now at the bottom of a bigger uptrend channel (blue) and at a horizontal support level (green), I am interested in a potential breakout of the bull flag to the upside.
What is your view on the AUDUSD?
Let’s take a look at the NZDUSD to check whether it too is in a bouncing spot just like the AUDUSD. Although there is recent downside momentum, the Kiwi has certainly approached strong horizontal support levels at 0.85. These levels could certainly provide enough support for a bounce. In case of the NZDUSD however, this horizontal support level can also be viewed as the neck line of a potential head and shoulders pattern so in that regard the AUDUSD has a potentially better bullish structure (bull flag) than the Kiwi.
Last but not least let’s review the USDCAD. The Loonie has severely slowed down in its movements. In the last 6 trading days the maximum distance between daily high and low was a mere 40 pips. And during all of the 6 days price has gone sideways.
This quietness has translated into an interesting wedge that could break both ways. If price does break upwards then be cautious of the 50% Fibonacci retracement (magenta). If price breaks downwards then be cautious of the deeper Fibonacci retracement levels (green).
How do you see the Loonie?
Thanks for sharing this article and Happy Trading! Chris
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