There are some unspoken trading secrets used by hedge fund managers and professional traders that can unveil some of the most profitable retail Forex trading opportunities. A Forex trader needs to remain very alert and mindful if they are to be successful. It can turn unpleasant if the right knowledge and skills are lacking
I sat down for a chat with Jeffrey Cammack from Fx-Australia.com to try and find out how entrepreneurial traders can be better and understand his vision for success in this area. Our discussion focused on four innovative ways to overcome the challenges that come with the Forex trading.
Trading Secret #1: Prices are “U” shaped.
On a daily basis, the Forex exchange market moves in a certain way. You can exploit get rewarded handsomely. Remember – price is “U” shaped.
A lot of the traffic on the highway happens during the morning commute when people head to work. The traffic then slows down in the afternoon, and at the end of the day, there’s a spike in traffic as the commute reverses.
That’s exactly how the markets trade daily too. During the major opening sessions there is a spike in volatility, and soon after that, the markets cools off until another major trading session opens. The way you can capitalize on this information is to trade or fade breakouts when the London and New York session begin. That’s the sweet spot of the market.
If you focus on trading only when there is “traffic” you will become a better trader.
Trading Secret #2: Big Trading Ranges always come after Small Trading Ranges.
This is a big secret that is overlooked by many traders. Big trading ranges always come after a series of a small trading ranges. This happens because the Forex markets move in a natural cycle from small trading ranges to big trading ranges and then back again.
A trader can capitalize on this information. Wait until you see a series of small price ranges and then make your trade – because we know that this will be followed by large trading ranges.
Trading Secret #3: Momentum Precedes Price.
Momentum precedes price is not quite a secret. It’s an old trading axiom known by many traders. The secret is how do you capitalize on this information and find new trading opportunities.
The secret way to gauge the momentum of a price swing is by simply connecting the picks in a downtrend (valleys in uptrends) of the momentum oscillator. For the purpose of this example, let’s use the RSI, which is one of the most popular momentum indicators.
When the momentum oscillator trendline that connects the picks in a downtrend is broken, that shows you that the momentum is shifting to the upside. Most of the time this will happen before the price turns which will give you an advantage in terms of your risk to reward ratio.
Trading Secret #4: Never Sell (Buy) an Overbought (Oversold) Market.
I’ve saved the best dirty secret for last. The cherry on the top. Conventional trading wisdom teaches you to sell (buy) when indicators show overbought (oversold) readings. But the truth is that you’re better off by doing the opposite.
When the Stochastic indicator shows an overbought reading for an extended period of time, that is a sign that a lot of buying is going behind the scenes. But it doesn’t mean the market is overbought. The same is true when a market is oversold for an extended period of time.
The way you can capitalize on this is to look after a setup similar to the one presented in the figure above (example for oversold reading). You need to keep in mind two things before implementing this trading tip.
First, the oscillator indicator needs to remain in oversold condition for an extended period of time. Secondly, you need to wait for a reset of the stochastic indicator and then sell in the direction of the trend. The key word is “extended” so don’t try to fade the oscillator indicator every time it’s in overbought or oversold territory.