5.5 Market conditions - Ear to the Ground

Market conditions - knowing the trading environment.
Remember that saying: ‘When in Rome, do as the Romans do’?
Would you believe it, but very much the same applies to the Forex trading. Before you trade, check out what kind of market you find yourself in. 
Is the market:
  1. In an uptrend?
  2. In a downtrend?
  3. Moving sideways?
And with any of the above, what is the volatility situation? Your stop-loss order and hence the risk management very much depends on the volatility of the market.
After identifying what kind of market you are about to trade in, determine the right strategy for trading it. Simple as that! But you would be surprised how many Forex traders forget to ‘scout’ the market before getting into the play, with disastrous consequences on their pip capital.
The very first step is to know the overall market situation of type of market on broader scale or a longer time-frame. We need to know whether the market is trending or is running sideways. If there is a trend then whether it is an uptrend or downtrend and what is the strength of the trend.
The second Step is to apply the strategy which you have tested and which works for you. The trading strategies include the time-frames; trading tools i.e. type of indicators, trend lines and such various tools. If the market is trending then the tools may include trend-lines and Fibonacci retracement levels. In ranging markets the tools may include fixed resistance & support zones and pivot points etc. Please note that we will need to again check the trend situation on the time-frame with which we wish to trade. 
The third step is to prepare a trading plan which consists of the time of the day to trade, how much capital you are going to trade with, rules about entries & exits, how much you are ready to lose per trade, profit targets and how you will be managing the trades.


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  • Market Conditions - Ear to the Ground






  • Range or Trend, Volatility can be Your Friend as well as an Enemy



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