Summer time is hitting the Forex markets fast and hard.
Price movements are slowing down and chart patterns appear quicker than usual on the majority of the currency pairs – especially contracting triangles are popular.
How can a trader tackle these chart pattern formations?
Usually speaking a trader can look for:
a) trading the tops and bottoms of the triangle OR
b) trading the breakout of the triangle (either trade the breakout, the false break out, the retracement after the breakout).
However a very valid question is whether the current market environment changes this approach?
The answer is yes. The 2 most significant changes are the following: the number of breakouts will be lower and less frequent and also, if a chart pattern does break, the likelihood of follow through does diminish. Practically speaking this means:
1) A trader can therefore attempt to trade the bounces within these triangles. By trading the tops and bottom of the triangle, the trader is capitalizing on the consolidation and chart pattern. Waiting for a candle stick pattern at the top or bottom of the triangle is a good way of receiving an extra confirmation that the pattern is holding (and not breaking). The EURAUD is an example of a triangle.
2) A trader can still trade the breakout but it is wise advice to be more cautious with the exact entry. Instead of taking the breakout, a trader can plan for the retracement after the break out (and avoid trading false break outs with big candle wicks as well). The GBPJPY is an example of a breakout scenario unfolding now. A good target to aim for is the bottom (magenta line) at 1.7250-40.
In general being more patient with and before trading will help the equity curve.
Winners Edge Trading wants to use this article as a platform to discuss summer trading in Forex market. Therefore we want to ask you:
What methods do you recommend other traders to combat slower movements?
Do you go on a holiday during this time or do you take some time off?
Do you trade different pairs?
Do you trade different time frames?
Share your experiences regarding summer trading in the chat box below!
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