Forex Strategy and recommendations to Analyze Market Successfully An essential element of any traders'forex strategies is understanding industry cycles. So what're market cycles? Unsure what market cycle you are in will affect your forex trading. Knowing the correct major market cycles is important 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. There are three major market cycles and the capacity to adjust to each cycle is a significant part of your forex strategy and will enhance your profitability. So you need to learn how to determine industry cycles if you intend to turn 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 just only move in these three cycles. A standard saying amongst forex trade is "The Trend is the friend." Trending Cycle Trending is when industry price moves in exactly the same direction consistently in one direction either up or down. What sort of forex market trend is inherently defined? A trend may be defined as progressively higher lows and higher highs. Of course if the cost movement consisted of a straight line either up or down, then identifying a pattern would obviously be very easy. In true to life, currency prices move do not relocate 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 type of bars on a chart. Consolidating is when the market is struck between two
horizontal support and resistance levels and cannot break these support / resistance levels for at least seven bars. You should use moving averages or other technical indicators to ascertain 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 marketplace has been consolidation for at the very least 7 bars and then a price sharply breaks using this ranging market sharply forex to create 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 technique for one or two 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 the time, breakout cycle about 10% of times and Consolidation for 60% of the time. So if your only forex strategy is for a trending cycle you then will only be trading for 30% of that time period and if you should be one of many few that have multiple forex strategy with common being the trending and breakout strategies, then you will still be trading only 40% of the time. This means that you will be sitting on the sidelines for approximately 60% of the time. Whilst it is definitely important to truly have the patience to hold back and pick high probability trades, looking forward to the market to improve cycles because you do not have a forex strategy for this cycle does not make sense. Some forex traders will then get sucked into making trades with the incorrect strategy into market cycles that the strategy just will not work in. This year in the July and August industry spent nearly all its amount of time in consolidation and breakouts with very few trends happening. A lot of traders I am aware only did not have a technique for this type of cycle so they really either lost money over these months or stopped trading altogether until 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 not cutting it in this cycle and I go about on developing my forex strategies so they included one strategy for each cycle. Now I'm comfortable trading and making pips in all market cycles. So it's important to have some forex strategies that cover each of the market cycles. You should try to learn what the various market cycles are along with having correct trading systems. Meaning you must develop the skill of correctly identifying different market cycles at the best time.
After you have the skill to spot the marketplace cycles then it is very important to own group of forex strategies that may cover each market cycle. As effectively identifying the marketplace cycles is really a skill that most successful traders have mastered. You'll need to discover ways to adopt your approach to those cycles to stay profitable.