All traders make money in the trending market.
But they lose more than that in the consolidating market.
So we need to avoid and foresee the consolidation market.
How can we do it?
I look most carefully at the location of price relative to the 50EMA. If it was above the 50 and price was in an uptrend but is now pulling back towards it or daily bars are breaching the 50 or closing below the 50, these are all signs for me an trend is weakening. Likewise if the 20EMA drops below the 50.
Of course, you can then use the 7 charts per currency to make a currency-focused assessment, and even the 28 main charts for a broader market assessment. Risk-on currencies all tend to move together, likewise risk-off currencies.
That is a great broad view for any trader when making a trade decision on the forex market especially with the 28 pairs tommor.
You need to read price. There are hints given to you in price action. Go back to your charts and study the consolidations. Look at how they are formed and what they are respecting while consolidating.
Isn’t it better to approach that most markets are ranging/consolidating and then look for trend confirmations? Avoiding the consolidation phase to me implies that it’s mostly a trending market out there, which isn’t the general consensus.
There are quite a few trend based indicators that help with this. A good TA book or a quick google result should reveal indicators like MAs, Bollinger bands, ADX, Aroon, Donchian channels, etc.
Chart patterns like wedges, triangles & diamonds typically indicate consolidations and possible breakouts. PA/candlestick patterns like the haramis, inside bars (ii or ioi formations) are what they are represented as on higher time frames.
There are plenty of ways to determine when markets are consolidating.
Yes they can be used. Fundamentals work on D1 timeframes plus. Smaller timeframes should be focused more around session times. Fundamentals are trickier but are easier to understand if you have an innate interest in trying to understand why markets move. Before trying to understand why elements on the economic calendar work it’ll help to undestand basic principles, like:
Consolidations are basically periods of low confidence or uncertainty. Certain elements are expected/priced already priced into current prices. Understanding what those elements are helps make sense of economic indicators like GDP, trade balances, PMIs, CPIs, PPIs, employment numbers, etc.
Use volume and volatility filters its simple
I just can’t agree with this sentiment. This is such a hard and firm rule leaving no room for nuance it makes it a very difficult statement to agree with.
Here’s a very good example of a tradable consolidation on GBPAUD.
For someone who’s trading D1+ TFs this is not an advisable trade for sure, considering the 14 consecutive candle consolidation. But when you jump down to the H4 TF you notice what a high probability trading environment this is b/w the predictable S/R range.
In this case this looks like a very high probability long setup to me because I focus on the H4/H1 intraday trades.
Edit: On second thought the following range may now be temporarily invalid as Shanghai eases lockdown restrictions. This may give the AUD more strength toward the downside against the relatively weaker GBP.
All quite rational of course, but maybe not what we’re looking at here.
If you are accustomed to trend-following, you have a trend-following strategy, optimised and trialled for a given time-frame, that generates entry signals from a trend-following set-up, with risk management rules and take-profit rules appropriate to trend-following, then that’s what you should stick to.
My aim is to take high probability low risk trades. I don’t have an objective to take a trade under all circumstances on any market on any time-frame.
There is a high chance of losing money on consolidation. So before noticing the entire price chart and gathering proper data about consolidation, never jump into a hustle. You can use the diamond, wedges, etc. charts for tracking the trends in contemporary consolidation.