It is well known that in order to trade effectively in the foreign exchange market, one must follow current trends. But sometimes market trends become very volatile. And when that happens, forex traders, especially newcomers, will become very frustrated and confused. Therefore, it is necessary for every trader to be aware of different trading strategies, especially when the market becomes unpredictable.
So here are some useful tips for effective currency trading in an unpredictable market. You can certainly apply these tips while using a demo account. Ultimately, using a demo account will allow you to practice Forex trading and prepare you for the real thing.
1. Check your economic calendar. You need to be sure that current market movements are not just based on temporary news. Because, if the economy is really low, it is better to avoid the currency market until everything returns to normal.
2. Check the rotation points as well as the resistance and support levels. In a volatile market you will notice that the lines of resistance and support are parallel. So you can expect the market to turn around as the resistance and support lines approach. You can also use a stochastic oscillator to help you identify good trading signals.
3. Use another indicator to check your conclusions. If resistance and support lines are touched, there is likely to be a break. And if that is the case, you will not be able to assume that the price will turn once again. So you may just want to place your orders outside the stretch of the resistance and the support lines to catch any breaks. However, you need to use another indicator to verify your conclusions.
4. Check your currency trading strategy. It always happens that two pairs of foreign currencies become contradictory. For example, USD / CHF and EUR / USD are two conflicting pairs. One of them will surely rise and the other will certainly fall. So you need to plan which currencies you will trade.