Have You Ever Thought Of Forex Trading Being a Series of Episodes?

Have You Ever Thought Of Forex Trading Being a Series of Episodes?

All traders love trends. It makes life easy when you don’t have to spend a lot of time analyzing what side to trade. All you need to do is look for an opportune time (e.g. on a correction) to enter a trade.

It sounds easy but in reality markets can be quite fickle, specifically intra-day and often act like a heat seeking cruise missile trying to shake out the weak hands. I find this to be especially true in the forex market where a currency can trade bid early in the day, for example, and then turn weak later on.

Trading is a series of episodes

For this reason I prefer to view trading in terms of episodes, not just trends. As I explain in Why You Should Treat Forex Trading as Being in Episodes Not Trends

Don’t get caught trading an old episode

This is a critical concept to understand for if you are trading an old episode when a new episode has begun then you will find yourself on the wrong side of the market.

Trading is like the Hot Potato game

Forex trading can also be compared to a the Hot Potato Game

As I illustrate in this article, in trading, a currency, for example, will keep moving higher (lower) until it reaches a level that brings in sellers (buyers) to stem the tide and either sends it sideways or reverses direction.

In other words, it keeps moving in one direction until the music stops.
This is when one episode ends and another begins.

How to identify a trading episode

Without making this a promotion for my Amazing Trader (AT) charting algo, I can only show you how I identify episodes. AT has clear decision rules when to confirm the end of one trading episode and the start of another in the opposite direction as illustrated in the following chart:

Get on the right side of the market using episodes

As a trader there is no worse feeling than to get caught on the wrong side of the market. The way I look at trading, it is common sense to avoid trading as if in an old episode when a new episode has begun.

Think about it. While it may be easier said than done, it seems a lot easier to be buying when the market is buying (up episode) and selling when the market is selling (down episode).

If you would like to more information on ways to get in sync with the current episode, send an email to jay@localhost