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Strategy for trading in the flat market

Friday, 23 February 2018 12:29
Strategy for trading in the flat market

Strategy for trading in the flat market is a trading method in the Forex market, in which deals are made in the periods of small price fluctuations.

According to statistics, two-thirds of the time of the market, it is in the flat, that is, it does not show strong directed movements of growth or fall. The most popular Forex tactics use trend fluctuations, involving the identification of moments of significant price impulses, and making money on them. If you use a similar strategy, you need to recognize quiet stages of dynamics, so as not to incur losses. During the flat periods, the chart moves in the price range, and the slightest increase in the activity of buyers or sellers can easily form a new trend, and the direction in this case is rather difficult to predict.

However, at this time, it is also possible to trade. Moreover, this approach is simple and profitable, therefore, all Forex novices will like it.

Features of Strategy for trading in the flat market

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To guess when such areas appear on the asset value chart, you will need to navigate in time. As a rule, the quietest market becomes after the closing of the main trading sessions. After European and American stock exchanges stop trading, large traders do not enter the market, respectively, there are no strong impulses that could form a trend. However, it is worth noting that at all currency pairs the flat comes at different times. For example, a few hours after the European and American exchanges have finished their work, the Pacific and Asian sessions begin, which means that EUR/USD will show calm, but AUD/JPY will be activated.

Trading according to the strategy

This tactics is based on the removal of prices from the borders of the channel. To build the channel, three points are used: maximum and minimum of the price.

The chart can break through the border, but then return to the range. In this case, the order is opened at the time of the price reversal. According to the strategy, restraining orders are placed at the point of the most significant rollback for the entire period of the flat.

  • Take Profit is placed near the opposite border. However, take into account that the price chart cannot reach this mark.
  • If you notice that the tendency turns within the range, you can prematurely close the deal, and open another, in the opposite direction.
  • You can also increase the profitability of the strategy using two different orders: Take Profit of the first is located in the middle of the range, the second - at the border.

In order to protect yourself from loss of profit, we recommend using a Trailing Stop, moving a Stop Loss as the price moves in a favorable direction.

Notes

It is easiest to work with flat states at night. However, in order to save liquidity, brokers at this time often increase the spread. The growth of the spread, in turn, can greatly affect the profitability of your trade. Pay attention to the width of the range: if the fluctuations occur in a narrow range, increasing this parameter becomes more likely.

Among the advantages of the method is a lot of possibilities for trading, as the Forex market much more often is in a quiet state. Also, it will be easier for you to predict the asset’s behavior, in comparison with the trend strategies.

Monitor the work schedule of the world currency markets and try to trade each currency only when the stock exchanges of the countries concerned stopped working.

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David Melton
David Melton

Financial expert. I work with investors and different companies. I write analytical reviews for newspapers and TV channels and I also manage researching projects

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