Assessing the ‘Tradability’ of the Markets

Filed under: Learn Forex Trading |

One thing that professional traders know is when to trade the market and when to step aside. However, beginners do not know this, and trade all of the time – and as much as possible.

 

It is important for your trading bank to know when to step aside. Sometimes, the best trade is to not have any trades. Capital preservation is the key to success, and you must do everything possible to preserve that capital.

 

Some market conditions are great for trading – such as trends. When a market is trending, volatility is moderate, and short-term support and resistance levels are being respected; this is a great time to be trading. Also, when markets are consolidating and are stuck in a clear range, this is also a good time to trade. However, sometimes, markets are just choppy and unpredictable. It is these kind of market conditions that you should try to step aside from.

 

For professional traders, a simple glance at a chart is all they need to assess the current market conditions. It is something that comes with experience. However, it is a vital part of trading and should not be underestimated. Choppy markets can do a lot of damage to a trading bank and can eliminate all of your well-earned profits in a very short space of time. Therefore, it is better to simply step aside and wait for more tradable market conditions. Not trading can be just as difficult as trading at times. So when the markets are choppy, go for a walk, play some golf, enjoy life! Go and take a week off, as the markets will still be here when you get back, and those choppy seas may well have calmed. Some days and weeks are just not worth trading. The sooner you accept that, and the sooner you might start to hold on to those well-earned profits.

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