It has been known that to effectively trade in the forex market, one has to follow the current trends. But sometimes, the trends in the market become very unstable. And when this happens, the forex traders, especially the newcomers, will become very frustrated and confused. That is why it is a necessity for any trader to be knowledgeable on various trading strategies, especially when the market becomes unpredictable.
So, here are some useful tips to effectively trade foreign currency exchange in an unpredictable market. Sure enough, you can apply these tips while using a demo account. After all, using a demo account will allow you to practice forex trading and make you prepared for the real thing.
1. Check your economic calendar. You have to be certain that the current movements in the market are not only based on temporary news reports. Because if the economy is really low, you better stay out of the foreign currency exchange market until everything goes back to normal.
2. Check the pivot points, as well as, the resistance levels and the support. In an unstable market, you will notice that the resistance and support lines are parallel. So, you can anticipate that the market will turn as it approaches the resistance and support lines. You can also use a stochastic oscillator to help you identify signals of a good trade.
3. Use another indicator to verify your conclusions. If the resistance and the support lines are touching, then, there is likely to have a breakout. And if this is the situation, you will not be able to presume that the price will turn once more. So, you may just want to set your orders beyond the stretch of the resistance and the support lines in order for you to catch an occurring breakout. However, you must use another indicator so you can verify your conclusions.
4. Verify your currency trading strategy. It always happens that two pairs of foreign currencies become contradicting. For instance, the USD/CHF and the EUR/USD are two contradicting pairs. One of them is certain to rise and the other is certain to fall. So, you have to plan on which currencies you will trade.