Different strokes for different folks

Well, actually I mean: use different trading systems and styles for different market conditions.

The last couple of weeks has seen some great trending markets in the major currency pairs, which has made for some excellent trading conditions when using a trend-following or momentum system.

This week we’re seeing (not surprisingly) a lot of consolidation going on as traders count their profits or cry over their losses and figure out what they’re going to do next.

GBP/USD over the last few weeks

GBP/USD over the last few weeks

So, it’s important that we apply the appropriate trading system to match the market conditions. Trying to use a trend-following system this week doesn’t meet with much success. You either end up getting stopped out a lot, or you just have to catch small profits when you can.

This week, we’re better off trying to use a forex trading system that works well in range-bound markets, or, stay out of the market altogether and wait and see which way the price is going to jump out of our consolidation triangle.

As successful trading is all about going with the highest probabilities, I’m going to try to keep catching trades in the direction of the previous trend (example: selling the pound or euro against the dollar) by catching bounces off the upper trend line. I’ll keep my stops tight and my targets conservative until we hopefully see the price continue in the direction of the trend in a few days time.

Good luck and trade seriously!

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