By Rob Colville on February 5, 2016 in
There’s rarely a dull moment in the financial markets these days, but perhaps you’ve noticed that more news and volatility hasn’t necessarily given rise to more forex trades of late? In fact, some traders have been reporting a real “snooze-fest” in the markets that began in late-January with a lot of major pairs moving sideways, or stuck in tight ranges, or simply not trading near key support/resistance levels where high-probability forex trades typically occur.
So what’s a trader to do at times like these, when opportunities are scarce or even non-existent? Well, the answer to that is “A few things, or nothing at all,” and here’s what we mean by that: While there are a couple ways to scout viable trades in transitional markets, traders must also be willing to stand pat and not take trades at all if that’s what their strategy requires at the time.
In essence, here’s what to do whenever forex trades become scarce, with the ideas listed in order of importance, so #1 is right there up front!
Anytime forex trades aren’t in high supply, it becomes rather tempting to take set-ups that “almost” or “sort of” tick all your boxes. It’s either done out or boredom or frustration, or due to traders’ expectations that they always have to be in the markets, but it’s a bad idea nonetheless!
Remember that a pattern by itself often isn’t enough to justify taking a trade. If that pattern doesn’t occur at a key price level, it’s not a worthy opportunity, and with pairs like USDJPY and EURUSD choppy and range-bound, we’ve willingly passed on numerous non-qualifying set-ups across virtually all of the major pairs of late for just that reason. The choice to stay mostly idle may not make for much excitement, but the results are most always better than trying to force trades that don’t “follow the rules.”
So, if ever your analysis fails to uncover quality forex trades, rather than forcing trades anyway, why not work on your currency watch list instead? As you scan the markets, note the overall trends, and plot the key price levels across various currency pairs where you would ultimately look for valid, trade-worthy signals in the near future. That’ll keep your trading activities productive even if you don’t immediately come away with new trades.
Whenever forex trades become scarce, before you switch markets and look to equities and/or futures for opportunities, switch time frames and look to the weekly charts of your favorite currencies first. The daily time frame is often “home” for traders like us, but even if you come up empty there, you may be surprised by the clean, trade-worthy patterns you’ll find by “zooming out” onto the weekly chart. That just so happens to be a strategy that’s worked well for us many times before!
See related: 3 Clear-Cut Set-ups “Hiding” on the Weekly Chart
I’d urge you to resist any temptation to intraday trade, though, as time frames like the 4-hour and lower aren’t nearly as forgiving, especially for longer-term trend trading. So whenever forex opportunities dry up on the daily time frame, look higher, and then, as we’re about to discuss, start looking elsewhere:
Here’s the biggest advantage of using a pure price-action trading strategy: It works the same way and equally well across different markets, time frames, and even asset classes. With it, you can trade everything from forex and futures, to indices and even individual stocks, which can help keep you going whenever forex trades become scarce.
Using the very same rules for entry and risk, we’ve successfully traded the FTSE on many occasions, and from time to time, we even look to the Dow 30 stocks. Recently, our strategy has uncovered possible trade set-ups in well-known stocks such as JPMorgan (JPM), Goldman Sachs (GS), Cicso Systems (CSCO), and this one seen below, in Disney (DIS).
See also: Pin Bar Reversal Trading Strategy
While we ultimately decided not to execute any of these equity trades this time, having a universal strategy designed for all markets gives added flexibility when we need it. One of our best and most memorable trades of 2015, for example, was in gold! So don’t be afraid to venture outside of forex trades, but when you do, be sure any trades are 100% in line with your strategy, and if not, calmly pass and wait for one that is, even if it means not trading for one, or even several consecutive, days.
There’s a misconception out there, especially among new traders, that having open positions at all times is necessary to be considered a real trader. The problem, however, is that while traders can control their own decision making, we can’t control the markets. Sometimes forex trades are prevalent, and other times—like we’ve seen recently—they’re not. All of this begs the question, “Are you comfortable and willing to trade less, or not at all, if the market so dictates?”
I believe that’s the key point of today’s study, so while it’s true that you can look to other markets and time frames for opportunities if ever forex trades dry up, this is more about discipline, patience, and a commitment to trading your strategy, both when it’s yielding valid forex trades, and when it’s not! Keep working hard in these or any markets, and remember that trading well doesn’t require you to trade more often. Perhaps it even means there will be some times when you don’t trade at all!