September 3, 2012

The State Of The Forex Markets Right Now In September 2012

Sorry for the lack of posts since March, but I have to admit that I fell out of love with forex trading due to a combination of two things - a lack of volatility (which affected the profitability of my main 4 hour trading method) and the uncertainty surrounding the Eurozone crisis.

Unfortunately even now in September 2012 the Eurozone uncertainty hasn't really gone away, and the major currency pairs still seem to be stuck in a rut.

Therefore I am still not using my main 4 hour trading method to trade the markets right now because the big price moves just aren't there any more.

However there are still a few methods that I like to use when the right trading conditions are met.

The main method that I like to use only generates one trade a day (and only when the conditions are right) and it involves trading early morning breakouts. I have discussed this method a few times before on this blog and it still seems to work well.

The key is to look for small overnight trading ranges and trade breakouts at the start of the London trading session and exit at key support or resistance levels - Pivot, S1, S2, R1, R2, etc.

The price will often be drawn to these key levels after an initial breakout because many other traders are watching and trading around these points on the chart.

Even this method isn't quite as profitable as it used to be because the average daily trading range for many of the top currency pairs has come right down. However it is still possible to squeeze out some small profits.

The other method I like to use basically involves placing high probability trades around key support and resistance levels. This could involve placing trades from short term or long term charts, and the success rate is relatively high.

There are no set rules, but to give you an example, I will basically open short trades at long established resistance levels if all of the indicators that I monitor (RSI, stochastics, etc) are overbought, there is MACD divergence showing that the upward move is running out of momentum, and there has been a pin bar indicating that there is no momentum behind any possible upside breakout, for instance.

The goal is to put the odds in your favour as much as possible, and this is fairly easy if you combine support and resistance levels with a few technical indicators and one or two proven candlestick patterns.

So what else have I been up to in 2012?

Well away from forex trading I have just spent 3 days at the Paralympics watching the swimming, athletics and a number of sports at the Excel centre, and before that I went to the Olympics to watch the weightlifting. All of which was very enjoyable.

Money wise, I've been spending my time creating other websites away from forex trading, but my main income still comes from my share trading.

As I've got older, I've moved away from AIM stocks and risky oil companies and now tend to invest in solid high yielders purely for the dividend income, whilst also trading the same companies when they are oversold in line with the wider market.

This has allowed me to bank some decent 4-5% (and sometimes higher) yields on a yearly basis and bank regular profits of between 1 and 10% dipping in and out of stocks such as BP, Tesco, Sainsburys, Barclays and Vodafone on numerous occasions.

In recent weeks I have banked a lot of profits and am currently sitting on a big cash pile. I'm hoping for a pullback on the Dow and FTSE to drag many of the big-caps lower, but it seems reluctant to fall right now, mainly because the markets are still expecting QE3 to kick in at some point.

So I'm mainly sitting on my hands, although IG Index and miners such as Vedanta and Rio Tinto still look cheap right now, and Barclays is approaching my optimal buying price once more.

Anyway back to forex trading, and I think the point to emphasise is that you need to be constantly evolving as a trader to keep making money. I myself haven't found it easy to make money this year, but I'm still ploughing on and I've ditched those strategies that no longer work that well as a result of a lack of volatility and too much uncertainty.

I know that I'm a lot better at making money from stock trading and investing, so that is where my priorities have been this year. However that may just be me because I know from looking at the performance of many of the traders on Zulutrade that there are still lots of people out there who are making money on a consistent basis.

Ultimately you just have to find the markets that you personally find to be the easiest to trade, and keep evolving your strategies to maintain your overall profitability.



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1 Comment on The State Of The Forex Markets Right Now In September 2012 »

September 6, 2012

Garrett @ Samurai Trading @ 8:34 pm:

I certainly can't blame you for taking a bit of time away from forex lately. The lack of volatility has made things a bit more difficult of late. Especially if you are using H4 and not doing much scalping then the decent moves were few and far between.

I found your blog a couple months ago and subscribed because I liked what I saw but forgot it was in my RSS until you posted this. Hopefully you plan on keeping up with posting going forward.

We may get lucky and something interesting will come of all the meetings and releases this week and volatility will return. Usually you can count on things starting to get exciting in September but with the ongoing crises it's hard to say.

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