How to Make the Most out of all Market conditions

So, you have been trading for sometime now, and unfortunately you have had some runs where your trading is exceptional, and other periods where you couldn’t pick a winner to save yourself. Well, the good news is that most traders have been there. In fact, I would say that almost anyone that has done any trading for any amount of time has been there. The normal response to this is to start doubting your system, and then go in search for the next great indicator, or system as your one clearly no longer works!

The good news is you are not alone, and secondly, there may well be a remedy for it. You may even be surprised to know that it may not be you, or your system at fault. I know most traders, and self-help experts experts will all agree that it is bad form to blame a force outside yourself. That it is also bad form to place blame, and not take responsibility. This is a sentiment I fully agree with, but…

And there is a but…The simple answer may well be that the market conditions changed, and therefore your system needs to adapt. Unfortunately no system will ever be right in all market conditions, but if you adapt a strategy to a trending market, and then adapt another for a range-bound market, then you are potentially saving yourself from heartache.

Some further good news…

Statistics show that markets will be range-bound more so than they trend. This also helps us as, we know that oscillators tend to work better in range-bound markets, whereas a moving average crossover may work better in a trend.

I note (as of writing) that the USD/JPY has been range-bound for at least a couple of months. This has provided excellent repeatable patterns to work with on a short term basis. We also know that the longer a market is stuck within its range, the more dramatic the breakout tends to be.

This also works in our favour, as we can set stop and limit entries above and below the prevailing pattern to take advantage of this. This essentially allows us to trade within the current range, and also look to capture the trend when it breaks out.

This is just one very simple example of how to adapt your trading to your environment.