As forex traders, in low-volume, high volatility, melt-up and melt-down daily trading environments, it seems that there has never been a more important time to monitor the fundamental driver of each trade that is being considered, and to monitor closely the correlated market movements, regional global market opens and closes, and upcoming macro-economic calendar releases. In low-participation, sporadic movement markets, it is vitally important to ensure that fundamentals are aligned with price action as best as they can be so that volume and speculative interest have no option other than to join in when the next major break comes, even if the current levels of interest are less than normal. There are times in the year that volatile intra-day moves continually fail to follow through, with asset classes locked in ranges that they cannot seem to easily break, and intra-day trading (inside the previous session high/low) dominating. These current conditions force traders to look to buy support and sell resistance at the intra-day areas, in-line with the four-hour trends. At quiet times of the 24 hour session, traders see dollar strength and dollar weakness in equal measure, while the market looks to load the price action into a couple of 30-minute chart candles that house all of the momentum. Currently, that momentum is favoring the short side of the Usd. When traders look at the technical and fundamental set-ups and the mix of momentum and price action and see continued failed moves outside of initial bursts the markets are signaling one thing, and it is normally because of reducing market participation and a distinct lack of speculative interest. The signal is that markets are not going to be moving hard enough in any one direction to form a mid-term trend, but are however strong enough to buy support on the major currencies on against the U.S. dollar at the low of the previous session. It seems that half of the markets are watching and waiting for the other half to break through previous session high/low price points, and only then will the high frequency algorithms kick in to turbo-charge a ride that quickly runs out of momentum.
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It is reminiscent of a squirrel trying to cross a busy road; a gap is seen, the break is made, but doubt creeps in, and a reversal is made, that gets countered by momentum, that reverses the reversal, that creates confusion, and things come to a halt in the center median with no indication of whether the move will hold or fail. The average trading ranges (ATR) tend to drop when speculative interest is on the sidelines and unable to impact the amount that forex pairs move in each trading session. As those situations form it is easy for price action to hold around the daily chart simple moving average areas (SMA), and when the 50, 100 and 200 SMA's are in play, as they are on most currencies right now, it is even more important to align price action breaks with increasing volume and speculative interest. Trading the summer price channels is similar to getting dealt a pair of 10's in a poker game; the player knows that they look good, and they know that the pot odds are above average. However, unless a few more players get involved, they also know that they may be holding them until the river, as the player maneuvers around the fact that not enough people want to get involved with things to make it worth their while taking a chance on the break-through. Sit tight and wait it out if the signal comes outside of 2 a.m. to 3 a.m, 6 a.m. to 7 a.m., 10 a.m. to 11 a.m., or 3 p.m. to 4 p.m. ET, and whatever happens, unless a major support or resistance area gets broken on increasing volume, there really should no need to be getting over-exposed. In 30 years of forex trade TheLFB traders have seen that low volume equates to failed break-outs and subsequent consolidation, neither of which are that appealing. Those who have mastered patience know that once the main price points break on increasing volume, that come on the next major leg of global equity trade breaking hard, the volume and ATR will move higher in quick fashion.
It will be a fundamental break that starts the technical ball rolling, drawing in strong volume that allows price action to hold, and in the mean-time, bank 30% early, pull the stop-loss up, bank again before the previous session high/low is hit. That leaves a runner that is already being held, just in case the volume and speculative interest increases, and breaks the range, freeing up the choice to then buy the pull-back to support. Traders should then repeat the process until at least Sept. 1.