By Vytautas Zilenas
Some forex traders are advocates of one trading system under all market conditions. They say it helps you to stay focused, concentrate on one thing and not to run into many different directions. If any market would be in a status quo condition forever that would be a good idea, unfortunately all financial markets change with time and what worked under previous market’s conditions may not so well work under this market conditions and when this market changes the method that you used for it will probably be no longer good.
As you have probably understood from my introductory paragraph I am not the person who would use just one trading system while trading. By the way, my favorite financial market is forex, although I try to monitor what happens in other markets as well. Why? All markets are interconnected and what happens in one market will surely affect other financial markets. So, I like watching a few markets and when I trade I try to see which trading system is best for me today and which currency pair is best to trade. Different currency pairs can be under different conditions. eur/usd might be trending while aud/jpy might be ranging. gbp/jpy might react to some economic news and eur/cad will not. So, you if you have only one system for all types of situations you’d better know what you are doing.
I know that market changes even on different time frames. When you look on a 4hour chart you might see a range, but if you check 1hour chart you might notice a swing and yet if you check 15 minute chart there might be some sort of day trend going on. This brings us to one more idea: you not only have to know which system to use, but also what type of trader you are. Even though there can be many systems for different market conditions, we should not forget that those systems would be differently applied for different time frames. Trend trading on daily charts will differ from the same kind of system on hourly charts. The same can be said about range trading, breakout trading and etc. They differ under different time frames.
Having said that, I must admit that one cannot be an expert in all possible systems and use them under all possible market conditions! However, a trader should learn to define what cycle any given market is under any given time frame. Then he can choose whether to trade the market or refrain from trading. Personally my favorite trading systems are forex news trading, trend trading and day trading within a range. I know that all traders have different preferences and their styles, so I am not trying to push my trading philosophy on other traders, but I have seen so many newbies fail and leave trading that I simply wanted to give some insights about usage of different trading systems under different market conditions. I know these are very general guidelines, but I am intending to be more specific in my next article about forex trading.
I would recommend watching a video on trend trading, which is one of my favorite trading systems and I would encourage you to read my article about economic news trading. My video on forex news trading is a continuation of my article about economic news.