If you have been actively trading this past couple of months, given the type of your strategy you would have either loved or hated the dynamics of the markets. While every trader needs volatility to trade, the predictability and the smoothness of the swings have gone out of the window, for almost every major forex pair.
You already know this as a fact. Why is this happening though? Lets take few of the major pairs and analyze.
EURUSD Daily Chart
GBPUSD Daily Chart
USDJPY Daily Chart
AUDUSD Daily Chart
These are all D1 charts, and you get the picture right? They all seem to be in a never-ending flat market condition.
Well this is bad news for long term trend followers. Systems like ‘Turtle Trading’ and ‘Bill William’s Fractal Break Out’ will be chewed up and spat out in no time. However there are techniques to find good quality trends across all the pairs, but its a scarcity on higher timeframes.
What does it mean to have no clear trend on Daily and above? It means that long term players are getting stopped out more often, forcing the to reduce their target range proportionally. Even get down to trade lower timeframes such as H4 or H1. Since more and more traders are falling back to lower timeframes, we are to experience whipsaws and craziness of the market, quite often.
Don’t expect to see currency correlation between pairs such as EURUSD and GBPUSD in these conditions. The charts don’t make sense and even trading them for harmonic patterns is a nightmare, because harmonic trading is supposed to be the perfect strategy for range-bound markets.
Among all this chaos, the situation has not changed much for the scalper. Of course he feels the changes in the markets, but it has not affected his trading compared to swing traders. In fact the condition favors the scalper, because scalping strategies thrive when higher timeframes are in range bound market conditions.
The markets are fractal in nature. Price moves in waves, and these waves are proportional to the timeframes. Even the change in market dynamics affect different timeframes proportionally. So the change of conditions in lower timeframes are always minimal compared to higher timeframes. Another reason is that the market has to create these swings in lower timeframes regardless of the overall direction of the higher timeframes.
While this information may not make you any profits, if you are a scalper you may continue profiting from the markets with peace of mind. Just know that very little adjustments should you make to your trading in order to tackle any changes in market-dynamics on the higher level.
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