Forex Market Trading Conditions
Environmental and trading considerations when trading the Double in a Day EA
Module 4 Forex trading conditions and currency factors for double in a day trades. When trading this technique we ideally want to catch a volatile move in the market. Moves that go in our intended direction quickly. Moves with very few retracements until the target is reached.
So it is important to consider the Forex market trading conditions. So factors such as the spread, currency volatility, and market phase play important roles.
Spread:
Where the spread plays a major role is in the stops. If the spread is say 3 and your stop is 12 then suddenly you actually only have a 9 pip stop. This applies to your initial stop as well as the break-even stops calculated by the EA. You therefore need to favour popular currencies with lower spreads.
Currency volatility
We are looking for price movements that move in our intended direction quickly. With very few retracements until the target is reached. Higher volatility currencies are better suited to Double in a Day trades. Currency volatility changes from time to time.
Volatility is given in Pips, in value and as a percentage. The pip reading is the most important as that is what we will be loading into the EA input. We are looking for currencies with high volatility and a low spread or the best balance of the two. In the end you cannot go too far wrong with the most popular currencies such as the EURUSD, GBPUSD, EURJPY, USDJPY etc.
Click on this link to see the currency volatility of all currencies over a number of weeks, by days of the week and hours in the day
The Phase the Currency is experiencing
Determining the phase a currency is in is important because it can give you a good idea what the price is likely to do next.
- If the market is trending it is best to trade in the direction of the trend and enter on new highs or lows and after small counter trend retracements.
- If the market is consolidating it is likely that any new world event or news will propel the price into a breakout trend. It is best to straddle the consolidation or join the new trend as soon as the breakout consolidation happens.
- Trend reversals have a unique profile so those skilled at spotting them early, do particularly well.
These phases are best seen when using the multiple moving average indicators on your charts. In order to access this course please use this link:
The 1 hour and 4 hour charts tend to give indications of the market phase when using the Multiple Moving average approach.
Other Double in a Day pages
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