It is no longer news that many major economies worldwide are falling and still contracting by the day, experts say this is the worst since the financial crisis of 1929. But with this in mind, some people want to know the impact of the recession in the foreign exchange market. The simple answer is that it greatly increased volatility and provided more opportunities to make more money.
Effects on trading range volume: Until now, the daily range for most currencies, notably EURUSD, GBPUSD and USDJPY, never went above 120 pips each, it used to be an average of 100 pips. But all that has changed today due to increased volatility. EURUSD now has a confirmed unofficial average range of over 200 pips. Lately there were times when he moved more than 400 pips in a day. People looking for a safe haven for their investments have turned to the Forex market, movements designed by fear and greed have led to increased trading range and volatility.
The implication of this is that more opportunities to earn more money have been provided. Central banks and governments around the world continue to inject stimulus funds to stimulate their respective economies, and participation is making more money available for trade and this money continues to be exchanged from one hand to another, this is what what forex trading is all about: exchange. With the availability of more money and greater volatility comes the provision of greater trading opportunities.
The negative side effect of these is that more naive traders will lose more money. Before now, it has been said that 90% of the traders lose money, but the case has even worsened to the point where around 1% actually keep the money. Indeed, this is a huge challenge for many traders. But the truth is, the opportunities still outweigh the risks for smart traders. If there is more money trading hands today, all you need to do as a trader is figure out how you can get your cut.
The three markets that have become most apparent: Before now there were three peculiar types of market, but they have become more evident. Traders need to understand these Forex scenarios in order to take advantage of them. Regardless of the currency pair you trade, you will always find the following when trading. They are the trending market, the countertrend market and the breakout market. To trade profitably in a trending market that happens about 30% of the time, you may need a trading system that shows accurate entry levels on pullbacks and bounces. The Fibonacci retracement is a great tool that could help you manage any system of this nature.
Trading in a contrarian trending market will require the use of a trading system that helps the trader trade from one market range to another. Support and resistance lines become useful here. A good understanding and proper application of pivot point analysis is crucial to trading profitably in this market.
This type of range trading also requires a trend indicator to alert you when there is no trend so you can prepare to trade, an oscillator indicator is also needed to help you determine when to enter trades. Oscillators help determine overbought and oversold moments.
When trading, the goal should be 20 pips per trade. You could also do 5 to 10 trades in a day. If done consistently for 20 trading days in a month, you can generate 100-200 pips daily which will translate to $1000-2000 daily. However, on a mini account, this will translate to $100 to $200 per day. Trading and earning 100-500 pips daily with great discipline is laudable but very achievable with good sophisticated trading systems at your disposal.
For breakout moments, all you need to do is prepare when the market is in a good mood for a long time. Often the breakout is in favor of the main trend of the day and at other times it goes in the opposite direction. Using the trendline breakout could be a huge advantage when dealing with this market technically. The news breakout is another category of this type of trending market. Straddling should also be used as a strategy.
Timing is everything: It’s one thing to know that opportunities exist, but it’s an entirely different ball game to determine the right time to take advantage of these opportunities. There are currencies that can be traded in a countertrend market when the banks are closed at a specific time. You may want to try trading USDJPY at 1:00 GMT with a target of 10-20 pips per trade if you are ready to pay the price. But keep in mind that after two or three swing movements, a breakout usually occurs. The EURUSD breakout occurs most mornings starting at 6:45 GMT. Look for a breakout of GBPUSD in the mornings at 7:00am GMT.
The trend comes after banks have opened and normal business has resumed. Start expecting trends for most races anytime from 3:00 am to 9:00 am for the Asia/Australia and London/Europe sessions, and from 1:30 pm to 2:00 pm for the New York. Also at 8am or 9am for GBPUSD and EURUSD and that only determines the trend for the day, barring a sharp reversal of fundamental announcements. However, it could be a correction that clears the previous direction of the market in another so that a new course is chartered for the day.
With all this in mind, I will advise you to choose how you want to engage in trading, based on your experience, time availability, discipline, and risk aversion.