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Strategies/Methods that work in lower volume, less trending markets

  • Post #1
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  • First Post: Edited 2:13pm Jul 30, 2009 2:12pm | Edited 2:13pm
I've been trading forex for almost a year and have just begun using a basket trading strategy that has performed very well up until about the start of July. It works in trending markets on a hourly basis (H1) on five currency pairs. From my research, decreased volume, etc. during the months of July and August can make them difficult months to trade this strategy. This is a question for experienced traders, those who have been trading successfully for at least several years: While I know that you have to 'customize' and make any particular system your own, what are some basic systems/methods that work well for you during these less volatile periods? Do you trade any differently during these periods? If so, how? The answers, along with any other suggestions would be appreciated. Also, if there's a better way or more concise way to ask these questions, would appreciate feedback. Thanks, Fx_Discipulo (Sorry about the spacing. I tried, but it kept bunching everything together.)
Hi FX Discipulo,

I trade with most fundamental/macro style trading but it seems like you do technicals. Anyway, I usually have a view on volatility (bullish or bearish) in addition to my view on price (bullish or bearish). To assess volatility I look at potential outcomes/scenarios that could cause currencies to move. When I assess that currencies are likely to continue ranging, I buy dips in ranges that correspond to important levels or dips that are caused by overreactions to news. Especially in ranging environments, news rarely causes sustainable movements, so there are good reversals to play until the trending environment comes back.

Quoting FX_Discipulo
I've been trading forex for almost a year and have just begun using a basket trading strategy that has performed very well up until about the start of July. It works in trending markets on a hourly basis (H1) on five currency pairs. From my research, decreased volume, etc. during the months of July and August can make them difficult months to trade this strategy. This is a question for experienced traders, those who have been trading successfully for at least several years: While I know that you have to 'customize' and make any particular system...
I think November, December, and January are the low to no volume months due to traders and investors being on holiday at that time. Those are the months I stay out of the market because of all the "little fish" scalping and confusing the price action. Because of this, none of my trading methods work. I don't trade super high volatile markets and I don't trade low/no volatile markets. Either way, I lose and lose big.
Where are you guys getting your "volume" data from??
I'd be interested to find out.

Holidays..that's a new one.
Central banks,banks,hedge funds,etc etc take a pounding because a large % of their staff takes off??
Don't think so.

It is wise not trading if you're unsure,but during your downtime maybe contemplate why the markets are sometimes jumpy.
The harder I work,the luckier I get.
Quoting kristdm
Hi FX Discipulo,

I trade with most fundamental/macro style trading but it seems like you do technicals. Anyway, I usually have a view on volatility (bullish or bearish) in addition to my view on price (bullish or bearish). To assess volatility I look at potential outcomes/scenarios that could cause currencies to move. When I assess that currencies are likely to continue ranging, I buy dips in ranges that correspond to important levels or dips that are caused by overreactions to news. Especially in ranging environments, news rarely causes sustainable...
Thanks Kris for your feedback. I think I understand the difference between volatility (bullish or bearish) and price (bullish or bearish). When you mention volatility, I believe you're applying fundamentals/news to the general market/currency pair. Whereas price, is more micro analyzing, to see where it's likely to go in the shorter term. Am I correct in this assumption?

But don't you find that with the decreased volume, the market reacts a little erratically, or overreacts to news/announcements that in higher volume times would have nearly no affect?

Also, the quote below seems to be a very important point:
Quoting kristdm
Especially in ranging environments, news rarely causes sustainable movements, so there are good reversals to play until the trending environment comes back.
Thanks again for the feedback, Fx_D

Quoting Jhig
I think November, December, and January are the low to no volume months due to traders and investors being on holiday at that time. Those are the months I stay out of the market because of all the "little fish" scalping and confusing the price action. Because of this, none of my trading methods work. I don't trade super high volatile markets and I don't trade low/no volatile markets. Either way, I lose and lose big.
Jhig, I've heard the same about July and August ... very slow, low volume months because everyone is on holiday.

So based on your response, you're actively and successfully trading now, during these months? If so, what are some things, if any, that you're doing differently?

Thanks, Fx_D
Quoting FX_Discipulo
Jhig, I've heard the same about July and August ... very slow, low volume months because everyone is on holiday.

So based on your response, you're actively and successfully trading now, during these months? If so, what are some things, if any, that you're doing differently?

Thanks, Fx_D
Well Fx_D,
I trade Eur/Gbp exclusively and for the most part price movements are slow, even during active seasons. What like about the pair is because is contours around my pivot strategy and respects S/R levels. Beacause my pivot strategy works for this pair I have not changed anything in my strategy ... other than, I donn't trade during Novemeber thru January. In addition, during these slow months (August/September) my pair tends to range which gives me more predictablility and understanding as to where price may be heading. During the slow and active seasons I take full advantage of price action. During those low/no volatility season I stay out.
  • Post #7
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  • Last Post: Aug 1, 2009 4:30pm Aug 1, 2009 4:30pm
Hi Fx Discipulo,

Thanks for your kind words. Actually what I meant is the following:

My view on price is based on weighing outcomes- what are the positive and negative factors for the currency pair right now, how much is priced in, etc. I also consider sentiment and other things. I pay little attention to economic data except for how the market reacts to it. If bad data comes out but currencies rally, there's positive sentiment. It's a little more complicated than this, but this is the basic idea.

My view on volatility is mostly based on price action, market perceptions, and what other markets are doing. In my view, markets are always either ranging or trending. If there is a huge price move and then a sudden retracement as traders "take profit" or start to price in a new or opposite view (since nothing is for certain in the markets, traders tend to second-guess themselves), a range is likely to form. Likewise, if price has been ranging for a while even though a trend in economic data has developed or a currency or commodity that it is normally correlated to has been rallying all this time, then I will be prepared for a breakout and engage in trend following-type of trading.

I don't claim to know where the market is going. I just consider possibilities (reasons) for the upside and downside in terms of both volatility and price.

Hope this helps,

Kris Matthews
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