Forex Strategy and recommendations to Analyze Market Successfully An essential part of any traders'forex strategies is understanding industry cycles. So what are market cycles? Being unsure of what market cycle you are in will affect your forex trading. Knowing the proper major market cycles is very important to 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 can find three major market cycles and the capability to adjust to each cycle is an important part of one's forex strategy and will enhance your profitability. So you'll need to learn how to determine industry cycles if you want to become 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, industry can only relocate these three cycles. A common saying amongst forex trade is "The Trend is the friend." Trending Cycle Trending is when the marketplace price moves in the same direction consistently in a single direction either up or down. What sort of forex market trend is inherently defined? A trend can be defined as progressively higher lows and higher highs. Of course if the price movement consisted of a straight line either up or down, then identifying a trend would obviously be very easy. In true to life, currency prices move do not move around in one direction consistently, so denying forex traders and easy trend read. Consolidation Cycle A Consolidation cycle also known as Non Trending or Ranging market, which appears like a sideways / horizontal line of bars on a chart. Consolidating is when industry is struck between two
horizontal support and resistance levels and cannot break these support / resistance levels for at the least seven bars. You need to use moving averages and other technical indicators to find out whether industry is consolidation or trending. In the event of a consolidating market, the moving average line will almost be horizontal. Breakout Cycle Now what's breaking out of a Consolidation? After the marketplace has been consolidation for at the very least 7 bars and then a price sharply breaks from this ranging market sharply to produce 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 on average ﻟﻸﺣﺪاث اﻟﺠﺪول اﻟﺰﻣﻨthe forex market is in a trending cycle about 30% of times, breakout cycle about 10% of times and Consolidation for 60% of the time. So if your only forex strategy is for a trending cycle then you will only be trading for 30% of times and if you are among the few which have several forex strategy most abundant in common being the trending and breakout strategies, you then will still be trading only 40% of the time. This implies that you will be sitting on the sidelines for about 60% of the time. Whilst it is obviously important to have the patience to hold back and pick high probability trades, awaiting industry to alter cycles because you do not have a forex strategy for this cycle doesn't make sense. Some forex traders will then get sucked into making trades with the wrong strategy into market cycles that the strategy just will not work in. In 2010 in the July and August the marketplace spent the majority of its time in consolidation and breakouts with hardly any trends happening. Lots of traders I know only did not need a strategy for this type of cycle so they either lost money over these months or stopped trading altogether before the marker started trending again. I was myself was in the exact same position. About mid way through July, I realised that my strategies where simply not cutting it in this cycle and I start on developing my forex strategies so they really included one technique for each cycle. Now I am comfortable trading and making pips in every market cycles. So it's important to possess some forex strategies that cover each of the market cycles. You need to learn what the different market cycles are along with having correct trading systems. Which means you should develop the skill of correctly identifying the various market cycles at the best time. Once you have the skill to recognize industry cycles then it is essential to possess group of forex
strategies that will cover each market cycle. As effectively identifying industry cycles is just a skill that all successful traders have mastered. You need to discover ways to adopt your way of those cycles to keep profitable.