The forex market is considered to be the most dynamic, unpredictable and volatile investment market in the world. This is why consistency is so revered by traders in the forex market. In other words, the best way to profit in foreign exchange trading is to consistently bring in profits.
Consistency depends on a trader’s capability to cope with varying conditions of the market. For instance, trend traders usually find it very difficult to cope with a ranging market because they have not prepared for it. A ranging market is essentially a period where the market is consolidating after a huge trend and before the next huge trend.
If you want to maintain your profits and even increase your returns from foreign exchange trading then you will have to ensure that you know how to cope with ranging markets. Consider the following facts.
The Market Ranges Two Times More Than It Trends
You would be surprised to know that the forex market trends only about 30 percent of the time that it is open in a week or a month. This means that, for 70 percent of the time, the market is in a state of consolidation. This is the main reason why you need to learn about ranging markets.
Even if the majority of your monthly foreign exchange trading profits come from trending markets, you cannot sit idle when the market is ranging. This is why you should try to find techniques that will help you trade in such conditions and add to your overall profits.
Ranging Markets Are Extremely Dangerous And Highly Volatile
When the market is ranging, the prices go up and down constantly. What this means is that there is no sustained momentum in a ranging market, whether you look for uptrends or downtrends. Effectively, foreign exchange trading in ranging markets can turn out to be very dangerous because false signals keep showing up and try to tempt traders into making mistakes.
Highs And Lows Of A Ranging Market Will Rarely Be Well Defined
Ranging markets are essentially markets where nothing of significance is happening. These are periods when rates in the market do not even have well defined highs and lows. In other words, ranging markets can be viewed as periods when rates move seemingly without reason and logic.
There Are Many Opportunities To Trade In A Ranging Market
However, because of the frequency with which rates move in ranging markets, there are many opportunities that a trader with the right foreign exchange trading strategy can use to benefit from. Profits from availing opportunities in a ranging market will be small with each trade but then can easily add up provided they can be achieved consistently.
The Right Placement Of Stop Losses Can Nullify Many Risks
The trick to making foreign exchange trading profits in ranging markets is to keep stop loss orders close to the breakeven point. This way, losses can be kept minimal while profits are maximised.