Adjusting Your Strategy to Market Conditions
Forex trader Mike Kulej of FXMadness.com reviews a couple of recent trades to help you figure out what to do when adverse market conditions render your usual strategy less effective—or worse—useless.
For a long time, often mentioned on these pages, I have been trading a specific situation on Fridays. At the start of the London session, I would typically place a straddle order, just outside of the trading range established over the preceding few hours. That range must be relatively tight and easy to spot on 5- or 15-minute charts. Most of the time volatility picks up and currencies develop trends, at least in relation to the previous period. They do not have to be large, 20-40 pips is normally enough to capture quick gains. I use this on the USD pairs and the set-up looks like this.
We can see a nice, easy to recognize sideways drift, which leaves no doubt where to place orders. In the past few weeks, however, this approach did not bring desired results. Markets changed the way they behave during the set-up period, with more price movement happening before the London opening.!--start-->