Broker to Trading

It might be said that the problem with strategies is that often 'they do not work', but there is arguably no strategy which is guaranteed to produce a successful trade. One way of looking at strategies is as patterns. These often don't work either, but they are used again and again. Patterns of any kind are to an extent market dependent on their appearance, but they may appear. At least they provide a way of approaching and interpreting the market.

Volatile markets can change the way momentum stops and starts, altering and breaking up patterns. Stop-losses and market structure can help protect against non working or partially working patterns and make market sense of them.

It would seem then that a strategy pattern needs to be fine tuned to use, for a whole host of factors including market conditions. So a strategy is really a strategy outline. And with all the fine tuning in the world, it may well not work either.

Fine tuning is though a good discipline, as is changing and adapting strategies. But one things which may be helpful, is drawing strategies from the market, that is basing them on regularities to be seen when trading. So it's a two fold approach, one having a strategy which is based on patterns and regularities in the market and two having an adaptive strategy. This may provide some protection from inflexible strategies and strategies which are too adaptable.

This accepts that the market changes, but also suggests that it does not change radically, and tends back to certain repeated patterns in movement of prices. It is an interesting conjectural point, whether the market does change significantly over time, to the extent that strategies become less reflective of pattern in the market.

So here are two strategies which hopefully can at least give some pointers to the way Forex pairs, in particular Yen, can move. Big figures, in the case of Yen crosses are changes in value directly to the left of the decimal point. For example, 98.99 to 99.00 or 99.00 to 98.99. In the discussion below, the part of the value to right of the decimal point is being used, to capture the journey between big figures.

This strategy assumes that halfway between big figures is strong support and around three quarters is support. The example is Yen. If the pair gets over .50, it then has to navigate to .75. Once it gets over .75, which may take a few attempts, it then has .90 in its sights.

So entry could be possible once it is over .60, with a point of strategy failure around .40. As it gets towards .90 more serious resistance may be expected. It may accelerate as it gets to the big figures, getting over and then falling back. So an exit can be taken around .98.

For a further target, .10 above the big figure, but the pair can get over the big figure and retrace deep back down, before turning up again. At a certain point this would become a move down, hence the point of pattern failure.

This strategy suggests why looking for breakouts around a big figure may be problematic, as the pair is caught up in navigating value around big figures, rather than actually breaking out in a linear directional fashion. For binary options, the big figure can be seen as both giving direction and at certain points along the way to it, changing direction.

This assumes that once the Forex pair gets below .20 it will tend to get to the big figure, but instead of bouncing may cut through. So entry could be possible around .20, with a point of pattern failure around .35. As the pair gets below .10 it may start to accelerate, but with retracements to be expected.

One problem is that it may bounce before it reaches the big figure and return back, hence the point of pattern failure. But the assumption is that momentum triggered and reinforced by the big figure target will get it there. When it hits the big figure it may cut through but encounter bounces around .85 or lower around .75.

If the pair keeps going, it may end before or at .50. This is because of resistance around .50 and also time dependent events such as market closes, affecting momentum.

For both these strategies, volatile markets can break them up, as they can break up order, which can produce a clear expression of these patterns in a trend.