Forex Strategy and recommendations to Analyze Market Successfully A significant part of any traders'forex strategies is understanding the market cycles. So what're market cycles? Not knowing what market cycle you are in will affect your forex trading. Knowing the proper major market cycles is essential for you and which forex trading system you need to be using. As each cycle requires an alternative approach from your own forex trading system. You will find three major market cycles and the capability to adjust to each cycle is a significant part of one's forex strategy and will enhance your profitability. So you need to discover how to determine the market cycles if you want to develop into a successful trader. The three major cycles are: 1) Trending 2) Consolidation 3) Breakout The Three Market Cycles It does not matter what financial market you're trading, the marketplace can only just move around in these three cycles. A typical saying amongst forex trade is "The Trend can be your friend." Trending Cycle Trending is when the marketplace price moves in exactly the same direction consistently in a single direction either up or down. What sort of forex market trend is inherently defined? A tendency may be defined as progressively higher lows and higher highs. Needless to say if the purchase price movement contained a straight line either up or down, then identifying a development would obviously be very easy. In actual life, currency prices move do not move in one direction consistently, so denying forex traders and easy trend read. Consolidation Cycle A Consolidation cycle also called Non Trending or Ranging market, which appears like a sideways /
horizontal distinct bars on a chart. Consolidating is when the marketplace is struck between two horizontal support and resistance levels and cannot break these support / resistance levels for at least seven bars. You can use moving averages or other technical indicators to find out whether the marketplace is consolidation or trending. In case of a consolidating market, the moving average line will almost be horizontal. Breakout Cycle Now what is breaking out of a Consolidation? After the market has been consolidation for at the very least 7 bars and then your price sharply breaks from this ranging market sharply to make a new high or low. That is basically it for the cycles So how exactly does this affect your forex strategies...? Many forex traders only have a forex strategy for 1 or 2 market states. The most popular forex strategies being Trends and Breakouts. But recent research has shown that typically the forex market is in a trending cycle about 30% of that time period, breakout cycle about 10% of اﻟﻔﻮرﻛﺲtimes and Consolidation for 60% of the time. So if your only forex strategy is for a trending cycle then you definitely will only be trading for 30% of times and if you should be one of the few which have several forex strategy with common being the trending and breakout strategies, then you it's still trading only 40% of the time. This means you will be sitting on the sidelines for approximately 60% of the time. Whilst it is always important to have the patience to wait and pick high probability trades, awaiting the marketplace to change cycles because you may not have a forex technique for this cycle doesn't make sense. Some forex traders will get sucked into making trades with the wrong strategy into market cycles that the strategy just won't work in. This year in the July and August the market spent many its amount of time in consolidation and breakouts with hardly any trends happening. A lot of traders I know only did not have a technique for this sort of cycle so they either lost money over these months or stopped trading altogether before marker started trending again. I was myself was in exactly the same position. About mid way through July, I realised that my strategies where not cutting it in this cycle and I start on developing my forex strategies so they included one strategy for each cycle. Now I am comfortable trading and making pips in all market cycles. So it is important to possess a set of forex strategies that cover all the market cycles. You need to learn what the various market cycles are along with having correct trading systems. That means you must develop the skill of correctly identifying the different market cycles at the right time.
When you have the skill to recognize the market cycles then it is very important to have set of forex strategies that may cover each market cycle. As effectively identifying the marketplace cycles is a skill that successful traders have mastered. You'll need to learn to adopt your approach to those cycles to keep profitable.