Successful traders think that Forex market has a cycle which impact their trading results. Some investors believe that trends repeat in the market. If you can chart these trends and forecast future price movements, you will be able to make profits luckily. There are some stages in the market where traders face problems to identify the place where you are existing. These stages are discussed here which will help you to identify the place where you are lying in.
Phase 1, no dominant trend
When no trend is going on, the currency pairs prone to be span bound. The price is most like to trade between the forecasted highs and lows. When the price goes down more than a stated range, in this time, the intensity of equilibrium upraises the price back to the equipoise. In this situation, you can make various short-term trades. After the movements of some pips, as a seller, you need to sell your trade so that you can avoid the unwanted situation. To make consistent profit, you must learn to identify the dominant trend in the market. The professional traders often refer the low volatility period as the dry market. So, if you take the trades during such state, it will be really tough to manage your risk profile and you will be losing money most of the time. Try to identify the support and resistance level along with the market momentum. This will help you to find the equilibrium point in the market.
Equilibrium means the perfect market value at which the stock should be sold preferably. Investorsoften find the equilibrium point by evaluating the slope of the moving average. Based on the time duration of the trading, traders ply moving average to identify the equilibrium price. You can also develop a professional trading strategy in the demo account so that you can deal with this phase without any trouble. Take your time and evaluate the data and look for the trade signals in the most suitable phase. Once you learn to manage the trades in a standard way, you can make decent profit without having any problem.
Phase 2, breakout
In this stage, the market breakouts its stagnation meaning that the span bounds movements are transfigured into right uphill and downhill trends. So, this is called breakouts stage. Based on the acceleration of the currency pairs, there are two parts of this stage. If there are some severe changes in the currencies, the movement could lead to erect. In this position, the investors should jump into the trades or you should skip it. If you are late, you can face a flat-rate amount. This is called straight up. Always remember, the breakout in the trading instrument usually takes place due to the high impact news. So, if you tune yourself with the major economic news release, it will be an easy task to improve your trade execution process. You will feel more confident and thus you will be able to execute better trades without having much complexities.
Unless significant change takes place, the movements will not be straight up. When the market keeping rallying, it will countenance resistance. At every point, the price will hit a higher price than the previous one. The value will be increased compared to the real price. Professional traders at Saxo markets loves to trade such market as it helps them to ride the extended trend without having any major problems. Try to take the trades in favor of the last trend since most of the breakout favors the trend. By doing so, you can significantly reduce the number of losing trades and thus you will become more confident with your actions. Be smart and take strategic steps so that you don’t have to blow up the trading account within a short time.
Phase 3, reversal
After reaching a high level, the price starts to return to the previous level. This is called the decline stage. Depending on the movements of the market, there are different forms of this stage. When the basics of currency pairs change, the market will respond rapidly. The values will be down so you need to take short positions speedily or skip it. This scenery is called nosedive. Sometimes, the price might drop from a top-trough and causes a major reversal in the trend. People who have strong knowledge about the chart pattern can take advantage of such reversal and make decent profit without risking too much.
Phase 4, unprecedented move
After completing these three stages, the market face ambiguity. So, the cycle begins again. In this time, some investors can forecast the upcoming actions. But this is difficult to predict even with the help of technical tools. If you are facing difficulties at this stage, you should stay away from the market at this particular time. There is no need to take the trades when you are not sure about the market movement. It is better to stay in the sideline when you don’t have any clear clue regarding the market direction. Learn about the important news event which can cause unprecedented moves in the asset price. It will allow you to scale the trade in a professional way.
Usually, different types of variables influence the market. This is really tough to forecasts the future value as the market is continuously moving. To do this, traders need to identify in which stage you are living in the current time. Based on this, you will able to make a wise decision to make profitable stages.
As an investor, try to go with the trend. Remember that the market is unpredictable. So, when you cannot able to predict something properly, skip it to avoid destructive loss. Try to believe in your effort rather than the prediction. This will provide you success in the Forex market and you will become profitable. But remember, shortcut doesn’t exist in this industry. Take your steps with great caution so that you don’t have to lose money due to aggression.
To read more on topics like this, check out the Money category