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How to Trade a Summer Forex Market

16 Years ago | July 07, 2014 7/3/22, 12:00 AM

Just because it is summer it does not mean it is not a good time to trade. There have been summer markets that are active and there are summer markets that have been characterized by choppy ranges. This is hard to predict although it seems better than even odds that we may be in for the latter this time around. So how to you trade this year’s summer market? Let me explain the way I see it.

The way I am currently thinking is that we may have to wait a year for a good summer market. By this time next year the Bank of England and the Fed will likely have started normalizing monetary policy by raising short-term interest rates. This should add some volatility to trading. However, all we have now are expectations over when this process will begin. This should keep markets hyper-sensitive to economic news and create some volatility around key releases. The market will then likely revert to low volatility ranges when there is a void in news events.

If my view of this summer’s market proves correct, then I suggest reading my article, 9 Trading Strategies to Use in a Low Volatility Market . These strategies are applicable to this year's summer marlet. See below for a quick summery and as I suggested, read the full article to get the finer points.

  1. Identify the market
  2. Be selective
  3. Watch out for stops and where you place4 them
  4. Stay alert, don’t be complacent
  5. News matters
  6. Have realistic profit expectations
  7. Beware of tight ranges
  8. Try repeat trades
  9. Avoid the temptation to write options without proper protection

If we wind up having choppy summer ranges, then stay especially alert during the last two weeks of August, typically the second thinnest time of the year, as that is when the early birds look to get a leg up by positioning for the post-summer market. In the meantime, the market may look at EURUSD 1.35-1.37, USDJPY 101-103, GBPUSD 1.70-1.72 (or 1.7050-1.7250) as the current ranges until proven otherwise. With that said, the forex market is starved for a trend so be on alert for any signs that one develops and why I said don’t be complacent, even if resigned to more of the same low volatility range trading,

 Jay Meisler, founder

Global Traders Association

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