One of the most common questions I have been getting lately from my regular readers of these articles and my students alike is about the current lack of volatility in the worldwide Forex markets. I am all too aware that many regular currency traders have been having a tougher time with the markets being in much tighter ranges than normal and have been finding it more challenging to get decent rewards for the risks which they are taking on their trades. While I don’t know when the markets will pick up or for how long we will be trading in these conditions, I can say that if you are armed with the right tools, education and plan, there really is no reason why we can’t trade these markets as normal. I say enjoy the quiet before things get more hectic. No doubt people will begin to complain about market volatility being too much when they do finally gain some momentum!
As I stated above, if you have the right approach to the markets and a solid rules-based strategy that can be applied to pretty much any market conditions, then it should not affect you as a trader. A couple of weeks ago I was teaching a Live Market Online class in our graduate Extended Learning Track (XLT) program and we were faced with the same choppy conditions as everyone else out there but chose to look outside the regular parameters of the markets to find a couple of short-term income trades around the start of the New York Cash Market open a 9.30am Eastern Time. Before the session began, I did my prep as needed and scanned the markets to find a couple of low risk and high reward trading opportunities to lead the students with when the class began. I always like to do some analysis ahead of the session start because this way the students get to see the trade setups I post ahead of time, giving them the chance to mark off their levels and setups on their own charts before I officially begin the session itself.
One trade I really liked the look of was setup to get long on the EURNZD cross pair. Lately, with market conditions being what they are, I have been working more and more often with the cross pairs (currency pairings of the majors but excluding the US Dollar). Typically the crosses offer us greater levels of volatility and movement, which is ideal for our short-term income and longer-term wealth trades we are looking for. The only downside of trading a cross pair is that the spread can sometimes be a little wider but I say if the market has the ability to move more, then so be it and I’ll make it up in pips if the trade works out in my favor. The prep screen I prepared looks like this:
In the above screenshot you will see the trade I am referencing on the bottom left for EURNZD to buy at 1.5608, Stop Loss at 1.5592 with 2 targets at 1.5650 to be conservative and the more ambitious target at 1.5770 for a runner. Again, I decide upon this particular set up due to the fact that I was looking for a market which I knew had the potential to move, making it ideal for short-term income. The trade actually triggered very early in the live session and reacted immediately from the level as shown below:
As you can see from the structure of the entry zone at 1.5608, there was large imbalance of buy and sell orders at this price which resulted in the formation of what we at Online Trading Academy qualify as an Institutional Demand Level. Only an institution could cause a move like this, hence why I was keen to take a low risk buying opportunity at this zone, in anticipation of a further upwards trend. At the time of writing this article, we hit our first target comfortably and some students took their full profits in the region of 1.5680, while others are holding out for more as they have no risk in the trade or have already banked some profits, as we can see from the chart here:
We also managed to find another nice trade opportunity on the more popular pair of the GBPUSD. In this instance, I liked the shorting set up not because of the volatility it offered but rather because the pair was at what I would define as a major extreme. Let’s take a look:
Take a look at the chart on the 30-minute timeframe to the bottom right of the above picture. You will see a nice level of supply that formed between 1.6998 and 1.7015. The style of the drop in price suggested that there was a major imbalance of buy and sell orders in this area offering a nice trade for a low risk and high reward should price return to the zone for an entry. This one stuck out to me especially because one or two of the students in the room where concerned that they had missed the trade because price was already falling from the area. As I always say however, it is best to sit on your hands and wait for the market to come to you than to go chasing it too aggressively. Patience was indeed the order of the day as prices didn’t get back there until around 2 days later, as shown here:
As we can see though, it was well worth the wait if you were prepared to set and forget your orders, something I highly recommend to install discipline and especially useful in stopping you from clicking buttons erratically in choppy market conditions such as we are seeing right now. In environments of low volatility it is vital to pick your trades that offer solid risk to reward ratios, have the patience to let the setup come to you and finally, take the profit when it is offered to you. The trades are out there if you know what to look for, no matter the market conditions.
Take care and look after your accounts,