*Why you should adjust your trading style to suit the current market conditions*
Happy Friday to you all! I hope your week was prosperous and you all stayed indoors and isolated. The world is a crazy place right now but together we can get through this. I am currently working hard to create consistent FREE content to share on my blog to keep your minds busy and occupied through these tough times.
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Changing your expectations.
I am primarily an intraday/long term swing trader. You can see this throughout the analysis I post on this blog and on my social media. I trade these intermediate/higher timeframe moves because it leaves me with more free time to do as I please and I do not then have to spend many hours in-front of my computer.
However, it is important to be flexible with your trading strategies and adjust your methods according to the market situation. Right now the markets are very volatile and choppy. The stock markets are making big swings each day with the Dow Jones index now easily moving 1000 points or more in a single trading session only for it to be reversed the following day. This makes it difficult to profit from longer term positions because the markets just aren’t consistently moving.
Therefore I am now adjusting myself to trading lower timeframe chart movements and taking quick profits to maintain capital growth. This can be day trading or holding positions for 1 or 2 days if necessary before taking profits and locking in a return on trading capital before the volatility likely reverses the current market direction.
Now let’s get right in to it and look at the GBPUSD FX currency chart for this weeks trading session.
An interesting fact, the GBPUSD currency pair is often referred to as “Cable”. This is because back in the 19th century, the British Pound and US dollar were the two major currencies of the globe and the exchange rate for this currency pair was transmitted across the atlantic ocean via a large cable.
The chart above shows approximately 4 trading days of price action on the 15 minute timeframe chart. When I do technical analysis of a financial instrument I like to keep the charts as clean and simple as possible, when day trading my charts do usually look the most complicated.
I use a number of technical indicators to find day trading opportunities including exponential moving averages (EMA’s), daily pivot points, my volatility indicator and the trendline tool. Combining these with basic trend analysis and common sense can often produce very good reward:risk trade entries with short duration that are perfect for trading in times of high market volatility and choppy conditions.
The chart below shows the same price action but with a few key points of analysis circled for your attention.
From left to right, the first circle clearly shows a break of the bearish trendline that had been holding price down on its last sell-off down to the 1.15 price zone. From there I saw the 50 EMA had crossed above the 200 EMA (second circle) and then price consecutively making new higher highs which is shown by the remaining 2 circles.
All of this provided me with confidence that the current daily buying momentum is bullish and that I should look to enter a long position trade on the next pullback. Therefore I would likely buy on the next higher low and be trading with the trend!
The chart below shows my long position entry.
My long position entry was entered on Wednesday afternoon after a strong bullish wick rejection candle of the daily pivot level. Also in this area was the bullish trending I had drawn on previously and my volatility indicator (bars at the bottom of the chart) were showing high levels of volatility over 2.0 which is a strong sign of a market bottom forming soon.
A stop loss placed below the lows of the candle and a profit target set at the daily R1 resistance level is enough to produce a trade with a potential reward of more than 3R.
As you can see on the chart above, the higher low and daily pivot level held strong and price began to climb. The bullish trendline was respected and price went on to quickly reach my first profit target within 3 hours of entering the position.
This is a very good example of a quick and easy trade to continue to grow your trading capital whist taking advantage of the increased number of price swings and market volatility currently being seen. Buying low and selling high, trading the lower timeframe price waves instead of longer term trends that might normally develop overnight but in current market conditions might take days or weeks to turn profitable.
- Direction: Long
- Entry Price: 1.16898
- Stop Loss: 1.16284 (61 pips)
- Profit Target 1: 1.18756 (185 pips)
- Potential Reward: 3.03R
- Duration: 3 hours
You will notice on the previous 2 charts I have a second profit target set at the 1.20 level. If momentum is strong and my first profit target is broken with ease, I like to take advantage of this and hold a portion of my trade position to try and squeeze out more profit.
A good friend once told me “Never close a current profit in the hope of a future one” and I use this in most areas of business and financial markets trading.
The chart below shows what happened in the following 18 hours of trading after the first profit target was reached.
All of the technical analysis techniques, risk management and profit taking methods that I use when day trading are all combined in to one trading strategy. You can buy my day trading strategy guide on amazon now for only £4.99 by clicking on the image below.
All my technical analysis is done using the TradingView platform. You can get access via the link below.
My preferred broker of choice is IC Markets. Low spreads and trading costs really help long term profitability. A link to their site is below.
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DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.