Market Conditions Not To Trade!!!

1
There are good times to trade and there are bad times to trade.
Its important to know the difference.


Every trader wants to make money, and the only way to do that is to be in the forex markets. When the markets are not moving right, being in the markets can be a bad proposition. Not taking a trade can save you from losing money, and when the markets are chaotic, losing money is the only thing that can happen.
Basically, anything that doesnt look like the chart above should be cautiously analyzed. There is an element of common sense as to what kind of market should be left alone. If there are no discernible peaks or valleys, if the market is chaotic looking, if there is no rhythm to it, if the white spaces are filled with candle wicks, these are all things to be avoided. In this Forex Education article I will tell you when shouldnt trade.
Below I will list a handful of conditions that you should consider stepping aside for.


Alternating Colors :

The market is making alternating colored candles, similar in length, one after another. Below you see an example of the EURUSD Daily chart where there was a period where the market was extremely undecided.
Alternating colors are a sign of strong indecision. At this point, anything can happen. The market could take off in any direction with little or no warning.


Railroad Tracks :

Railroad Tracks are a set of 2 candles next to one another. They are longer than average and they both are different color. The market shot up and then right back down again, or bolted down only to immediately rebound. This is often fundamentally driven, and often there is something more to follow. This is an element of “oops, we made a mistake” by the market participants. From here, things can get tricky.
Railroad Tracks can also mess with your indicators, your levels of support and resistance, your hair-do and where you place your stops. Many times railroad tracks will have you placing huge stop losses on an unreliable trade. Until things sort themselves out and establish a flow once again, I like to sit on my hands.


Wicks (the Centipede) :

There is a scenario where you will get a market that is very undecided and will form many longish wicks on both the top and the bottom of the candles. The market rallies and drops off very quickly. It will do this over and over, and at this point there is no method to the madness.
These wicks will look like the legs of a centipede. During this phase, the market can wander up wards, downwards or just sideways. In any direction, there is still an undecided direction in the market. The bulls and the bears are fighting it out and they are equally strong. Knowing who will give up first is difficult, as it could be anybody’s game.
Wicks form poor peaks and valleys, and in a centipede, there will be non distinguishable peaks and valleys


Saw Tooth :

The saw tooth is a market condition where price is moving in a very tight range, not forming clear highs or lows, but is definitely moving.
A saw toothing range is kind of like the junk drawer of candle formations. You will have everything from tiny dojis to longer engulfing to long wicks to spinning tops and so on. It’s a random mash of nothing cool.
Very difficult to trade and will likely stop you out before hit your target.


Sideways :

You will find sideways markets before and after many news announcements, and depending on the timeframe you are trading, throughout the day in the off sessions.
A sideways market is just that, price is moving sideways and making very small undefined candles. When price is in these little ranges, the indicators are forced to interpret the market in some manner, so will get a lot of fake divergence trading signals that mean absolutely nothing.
In the above example, you see the USDCHF doing absolutely nothing at all. At this point, there is no battle between the bulls and the bears, they are content to have picnics and campfires. You can try to provoke them by placing a trade, but they will most likely just ignore you.
Eventually the pyjama party will come to an end, one of the bulls will say something inappropriate and the battle will ensue, but when this will happen and who will get the immediate upper hand will be hard to determine.


Shark Tooth :

This will make sense when you see the charts. The market makes very quick and sharp highs and lows. The flow is very erratic and the highs and lows are quite close together, even though the price does move quite a distance.
“Long and sharp” are the key defining words to describe a shark tooth market


Long Entry Candles :

The setup is perfect, the divergence is clear and the trendline is awesome, you did a great job finding the setup and watching it form. Finally we get a cross past the trendline, and the entry candle is HUGE, twice or more the length of the average candle in the neighbourhood!
Do we take the trade?
For me, no. When you have a much larger than average entry candle, your stop will have to go too far away, and the large candle may have used a lot of the move the divergence trade should have banked


Lack of Wedge formation :

I love the Wedge. We know it as Trendline Divergence; it is a beautiful sight to behold. As price climbs, it fails to move farther away from the trendline, show us depleting energy or momentum. If this wedge formation is not formed, I believe there is still power in the trend and will wait for a more wedgie formation. Below is an example of a nice falling wedge formation.
The wedge is depicted when a trend line and the divergence line look to be coming together. If you were to extrapolate the two lines, they would come merge in the distance. The opposite of this is when the two lines are extrapolated, they would either stay parallel to each other or move apart from one another. The example below shows a separation of the lines rather than a coming together. A non wedge formation.


non wedge :

This seems like a lot of different instances where you would not take a trade.
Fortunately for us these don’t happen all the time. The market moves in a tradable manner a lot more regularly than any of the non-tradable examples in this manual.


Always improve your trading by learning Price Action Trading.

hope useful
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Jedidiah
what we want: 1+1+1+1+1+1+1+1+1=9 <3
what market delivers: 1+2+8+7-4+0-5+8-4-5+1=9 :problem:


Re: Market Conditions Not To Trade!!!

2
When Not to Trade

Personal reasons not to trade:

1:Get rid of all distractions. You need to be able to concentrate on the charts and not get caught up with other things going on. For instance you might be waiting for a trade and then you get distracted and when you come back to your chart you have missed the trade or you buy instead of selling etc. Distractions can be costly. However, life is full of distractions so put the cat in the hall and shut the door. Put the baby in the playpen where you can see/hear her but at least you won’t have to worry that she has wandered off again… Whatever your potential distractions are, deal with them before you start to trade. Even a Ninja can lose a fight if distracted…

2:Emotional times. If something emotional has happened, and you can’t be subjective, then do not trade! This could be any number of things that had a negative impact on your day. It could be that you broke up with your partner to a death in the family etc… You need to be able to assess what’s happening in a very short period of time, and if you are mentally elsewhere then this can have a negative impact on your trading account…
The personal times that you shouldn’t trade can really be summed up as times when you are out of synch with your normal body rhythm. These are times where your emotions or environment can negatively affect the way you trade, and can seriously hamper the likelihood of a successful trade. The good news is these tend to be things that you can control or have some degree of control over. The market reasons for not taking a trade are a bit different. These tend to be external where you have very little or no control over them. These can really kick you in the butt and leave you limping for a while. Ignore these at your Peril!!


Market Reasons not to trade:

Bank Holidays. These are scheduled and there is nothing you can do about it. If there is an USA or UK Bank Holiday I don’t bother trading. This is because the Banks are the biggest participants in the Forex market. If they are on holiday then the volume of transactions being carried out is greatly reduced. This can lead to either really static markets or on occasion erratic markets. Either way it does not follow the normal pattern, so I stay clear.

If however, it’s a Bank Holiday in another country such as Japan or Australia then I wouldn’t trade currencies that belong to those countries, e.g. jpy or aud pairs, but would still trade the gbp/usd/chf etc pairs…

News. There are scheduled news releases, and economic news, that is due to be released throughout the day. These can be found, in advance, in a number of places but the most popular one seems to be the Forex Calendar, provided by Forex Factory.

There are 3 types of news; yellow, orange and red. Each has a different impact and is all explained in the calendar. There tend to be folders that generally are not a good idea for a new trader to try and trade. High impact, red folders, can really move the market, sometimes spiking in both directions, before settling done. These are high risk times where a lot of people get stopped out.

The one’s I specifically avoid would be the ISM Manufacturing data, interest rate announcements and NFP related news announcements. However, it’s not just the announcements themselves that can affect the market. The rumours surrounding what the potential numbers will be can cause the markets to move in anticipation. Therefore, it’s not a good idea to trade, for the hour before or after the news. With NFP, it’s a good idea not to trade that day at all.

Now that may seem extreme, but these can be the biggest account killers and can wipe out a new account in a few seconds.

Speeches. These tend to generally be on the calendar as well. If specific people are talking then please do not trade. These people include the ECB President Jean-Claude Trichet, Fed Chairman Ben Bernanke and BOE Governor Mervyn King. It’s important that when the BOJ Governor Masaaki Shirakawa speaks to pay attention. These tend to happen when people are asleep so less of a worry. But if you are trading the Japanese session then be wary!!

These people are notorious for dropping hints about economic policy changes that are likely to happen with the currency they are responsible for. These hints cause a lot of speculation in the market and therefore a lot of price movement. These can be big currency movers as they are generally responsible for setting Interest rates in those countries, and as mentioned above interest rate announcements can cause large movements.

Erratic Periods. There will be times where a currency is moving differently from normal. Perhaps it’s spiking and you don’t know why. This is a good time to stay out of the market. If you don’t understand why it’s moving like this then it’s generally because there is unscheduled news that has been released or leaked. This is generally bad news and the market is still unsure as to how to react to it. For instance, this was happening during the recent credit crunch and the various Banks reporting that they were having major difficulties.

Weekends. It’s unadvisable to hold trades over the weekend, unless your method is a long term strategy which specifically involves holding trades for longer time frames, such as weeks or months.

A lot can happen over the weekend. All it would take is for 1 Bank to go bust over the weekend for your position to go completely different from how you expected… A terrorist attack could happen over the weekend, which would also move the markets crazily. Now these might seem out of the norm but if you look these have happened recently on more than 1 occasion.

These types of events will generally lead to the market opening again will a large gap and generally with a large change in your position. A lot of times this can cause serious harm to your trading account balance.

Market close/open. Good idea to avoid these or be wary around these times. At market close a number of trading positions are being closed. This will lead to volatility in the currency markets and can cause the price to move erratically. The same applies at market open. A lot of people are opening positions as they do not want to hold them over the weekend for the reasons stated above.

December and Summer Holidays.
Banks tend to trade the Forex markets at least once a day for balance sheet reasons and can also trade a number of times throughout the day for speculation reasons.

When say balance sheet reasons, mean to balance out their currency book. They need a certain amount of each currency to meet the demand of their customers, both personal and business, that will need to buy foreign currency from the bank or exchange their foreign currency for their local currency. Banks have to balance this out each day otherwise they leave themselves open to Foreign exchange risk. This means Banks are the major players in the Forex market.

So during December and the summer months a lot of Bank staff take their holidays. Therefore, Forex markets generally slow down as there are fewer participants in the marketplace. This is generally a good time for private traders such as us to take a holiday. If the markets are flat there’s no point in trading so go off and enjoy yourself.

You gotta keep your body in prime fighting condition but holidays are also part of giving your mind some relaxing time to recharge those batteries, ready to go when you return.
what we want: 1+1+1+1+1+1+1+1+1=9 <3
what market delivers: 1+2+8+7-4+0-5+8-4-5+1=9 :problem:


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