Tendencies

Tendencies – typical behaviors or the way something is likely to react. We can use tendencies in the market to enhance our edge and take advantage of repeatable occurrences. The more time you spend in front of your charts, the more you will notice tendencies in the Forex market. These are several I have observed and picked up over the last 9 years. Remember, nothing in trading is absolute, but additional knowledge can increase our profitability and consistency.

Here are just a few:

1. The EUR/USD tends to reverse or create structure around the 20’s and 80’s. For example 1.3320 and 1.3380.

2. The GBP/USD tends to reverse or create structure at the 50’s and even handles. For example 1.5550 and 1.5600.

3. The USD and JPY tends to move in the same direction approximately 80% of the time.

4. If during the London and New York overlap there is a large sell off or rally (100+ pips), the afternoon of New York and often into the Asian session, the market tends retrace from the overlapping volatility and price action. I call this “drift” as the low volume and low volatility during these off-peak periods may take several candles. The move tends to be typically very slow but very deliberate. These can be low stress and high profit trades.

5. The market tends to be the most bearish or bullish before a trend reversal. A large impulse or “last gasp” often occurs just before a trend reversal. This is what creates a “hammer” or inverted hammer candle pattern.

6. A Fib retracement to .382 level of the AB leg tends to terminate at the 1.618 expansion of the AB leg.

7. A Fib retracement to the .618 or .786 level of the AB leg tends to terminate at the 1.272 Fib expansion of the AB leg.

8. A Fib retracement to the .50 level of the AB leg tends to terminate at the 1.414 Fib expansion of the AB leg.

9. The market tends to sell off faster than it rallies.

10. Structure leaves clues. The market tends retest previous levels of strong support and resistance.

11. Trading is 10% psychology and 90% strategy until you trade live with real money. It then tends to become 10% strategy and 90% psychology.

12. You can not develop a viable trading strategy based on fundamentals. Fundamentals tend to not be consistent, repeatable or reliable and therefore have no quantifiable or measurable metrics that can be incorporated into a profitable trading system.

13. The market tends to trend only 30% of the time.

The more you incorporate these tendencies into your trading sessions, you’ll be less anxious and more in control.

Please comment on other tendencies you have observed or use in your trading.

These are the nuances professional traders use to sharpen their skills and a focus on the best opportunities.
Rick

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