ATFX - Judging market conditions and foreign exchange trading strategies

atfx- Determining market conditions is a necessary prerequisite and foundation for forming an effective trading strategy. For real trading, there is no need for particularly complex analysis, but only to make buying and selling decisions based on market conditions and signals. Real trading does not know how the market will behave in the future, it just follows the pace of market changes. The complexity of the market is more reflected in the analysis of the market than in the operation.

　　Because the analyst needs both to explain what has happened (which requires a lot of data) and to indicate the likely direction of the market in the future (which requires a lot of data). Explaining what has happened is relatively easy, while looking forward to the future direction is simply an impossible task (fortunately, the probability of right and wrong is equal). Therefore, there is an essential difference between market analysis and real trading. Real trading requires most of all to judge the state of the market, and therefore form current trading ideas and strategies, and then keep up with effective capital management and stop-loss.

　　For traders, adapt to the market to survive; for analysts, the prediction market to survive. The positioning and requirements of the two in the futures market are completely different. So, if you are an investor, don't put yourself in the wrong position, don't try to do the analyst's forecasting work, because that is not your job, because you are not earning the analyst's salary. Correct your position, you should try to be an adaptor to keep up with market changes. For investors, it is survival of the fittest, not survival of the prophet.

　　Having said all this, I just want to express strongly that it is very important to judge the state of the market. Judging the state of the market is the basis for adapting to market changes.

　　So, how do we judge the state of the market? How can we form an effective operating strategy based on the state of the market? First, you must give up the illusion of being able to know in advance what state the market is about to enter. Knowing in advance what state the market is about to enter is like knowing in advance where the trend will be and when it will start or end (and vice versa), which is something that can only be done by the gods.

　　The state of the market can only be discovered after it has been running for a period of time, that is, it already exists, we can only find out, not before it has happened. This means that there is a price to be paid for judging the state of the market. I think this price is very necessary, and we can factor this price into the cost of acquiring new trading opportunities, or as normal profit-taking.

　　When the market transitions from a trend state to an adjustment state, we can't know at first. After a few back and forth fluctuations in prices, we can find out that the trend has ended and the market has entered an adjustment state. At this time, our original profit from holding positions must be reduced, and the reduction or take-back of profits makes us get something valuable: the market has entered a new state, and we must change the way we operate. The change in the way we operate allows us to start adapting to the market again, which at least reduces our unnecessary losses and also makes new profit growth possible.

　　Indeed, when it comes to trading, what often happens is that you can only get a return if you pay or are ready to pay, rather than starting to pay after you have a return. Although the human instinct is to be willing to pay if you have a return, the market does not agree! Therefore, we should be ready to pay at any time to meet the possible market returns.

　　From the trend state to the adjustment state, we need to pay a price, which is mainly manifested in profit taking; and from the adjustment to the trend process, we also need to pay a price, which is mainly manifested in stop loss. Yes, there are only two states in the market: trend state and adjustment state. Trend state is divided into upward trend and downward trend, and adjustment is divided into small correction and large fluctuation.

　　Since there are only two states in the market, the rest of the job is relatively simple. The oscillation starts after the trend ends, and the trend is after the oscillation ends.

　　Let's first talk about the oscillation state. The oscillation state is divided into: large oscillation and small consolidation. To judge the oscillation state, we must first look at whether there is a trend in front of us, which is the premise. On this basis, judging the oscillation state can be mainly observed from the following aspects: the speed of price movement, the magnitude of price fluctuation, the direction of price movement, and the speed of change in the direction of price movement.

　　In a state of shock, prices usually move very fast, and at the same time, the amplitude is very large, so large that it is unbearable (the insurgent) or like a sudden pie falling from the sky (the right one), giving people a feeling of mountains and tsunamis, like a roller coaster. The most troublesome thing is that at the same time, the direction of price movement also changes sharply. Today, the price falls sharply, the bulls are almost desperate, and the next day it rises sharply, leaving the bears in a state of despair. That is, in a state of shock, the price moves very fast, the amplitude is very large, the direction is not sustainable, and the price turns around very quickly. Once such characteristics appear in the market, we can judge that it has entered a state of shock.

　　ATFX - The strategies for dealing with volatile states are: arbitrage, wait and see, and shorten the trading cycle. The market generally has strengths and weaknesses in each contract under any circumstances, especially after entering a volatile state. Because in the trend, each contract is basically in the same rise and fall, and entering the volatile state, the strength of the contract will begin to diverge, which provides conditions or opportunities for us to deal with complex shocks. Once we judge that the market has entered a volatile state, buy strong contracts and sell weak contracts, without paying too much attention to their prices.

　　If you buy a quilt cover, you will sell a weak contract, and if you sell a quilt cover, you will buy a strong contract. In my own experience, this operation is not only relatively low risk and good mentality, but also sometimes the reward is good. This is the best choice to deal with shocks. If there are no obvious strong and weak contracts in the market, and there is no opportunity for arbitrage, then you can choose the easiest way: stay on the sidelines and wait for the breakout of the volatility range. This is also a good choice, but it is relatively negative. Sometimes you will lose your attention to the market because you don't have a position and miss the breakout opportunity. The third is to shorten the trading cycle. If you usually look at the sky chart, you can look at the hourly chart or the 30-minute chart instead. Because the time-share chart can reflect It can also be combined with time-sharing charts and arbitrage. Whether it can be combined or not depends on the market conditions at that time.

　　After a major shock, the market will generally enter a state of small fluctuations. Just as people enter a state of calm after intense exercise. Once the market enters a state of small fluctuations, we will start to readjust our operating strategy again. If the arbitrage profit is still expanding (usually not, because the price volatility is small and it is difficult to open the spread), we can hold on. Otherwise, we will start to enter the trade of unilateral positions, because small fluctuations are a sign of the end of the shock and a precursor to the beginning of the trend.

　　After the market has undergone large fluctuations in the early stage, the price fluctuation range will naturally form, and at the same time, with the passage of time, the moving average will begin to bond. At this time, we can choose a relatively effective moving average according to different varieties (the effective moving average is the moving average with relatively few error signals) as a reference. Once the price is related to the moving average, the upper one will buy and the lower one will sell, all with the moving average as a stop loss, but the number of transactions must be small, so small that a loss will not affect the subsequent transactions. This is a tentative trade to start looking for a possible breakthrough direction in the market.

　　On this basis, if the position entered according to the moving average is in a profitable state (the position cannot be lost, and the loss will not be held), then once the price breaks through in the direction of our profit (the price leaves the oscillation range), the real trade starts, which proves that we have found the right direction! At this point, the complex oscillation is over, the difficult time is over, and the trend of our most desired friend - the trend - starts to come to us.

　　In contrast to the adjustment state, the starting condition of a trend is usually a previous adjustment state, but this is not entirely the case, such as a V-shaped reversal.

　　ATFX - First of all, talk about the general situation, that is, the trend state formed after the end of the adjustment. The emergence of this trend, as long as everyone is ready to stop loss, generally can do it. But whether to hold it after doing it is another matter. At this time, the characteristics of the market are as follows: the price leaves the previous shock range and does not return to the shock range. This is the beginning stage.

　　Then, as time goes by, the chaotic moving averages begin to appear in the typical long or short arrangement. Once the moving averages are perfectly arranged, we can get rid of the psychological torment of false breakthroughs, and we have already embarked on the express train of profits. In this case, whether we can hold a position is the only criterion to show the level of investors. The principle of holding a position in a trend is generally to pay attention to the 20-day or 40-day moving averages. Because it is difficult to reach the position of these two moving averages with a general discount, if the price returns to the 40-day moving average, and it is fast, it may mean that the market is about to enter a state of shock.

　　In a trend, as long as the price does not return to the correction that occurs below these two moving averages, we can consider it a normal break in the progress of the trend, and we don't need to pay too much attention. If the trend starts moving forward again after a normal adjustment, it is another good opportunity to enter the market, and the value is equivalent to the breakout of the first oscillation range, and it is more reliable.

　　The trend formed by a V-shaped reversal is only different from the trend formed after adjustment in the starting phase. The market deduction characteristics after the trend is formed are the same. Therefore, for a V-shaped reversal, I mainly talk about the characteristics when the trend starts. The V-shaped reversal does not have the characteristics of a breakthrough, and the price shows a sudden and sharp reversal. In the early stage, it is a sudden decline that directly enters the rally, with almost no warning. But because of this, we can also find the distinctive characteristics of a V-shaped reversal on the graph, but not from the price, but from the moving average.

　　The premise of a V-shaped reversal is that the market is in a trend, which is its greatest characteristic. Since the market is in a trend, the moving average is in a long or short arrangement, that is to say, if the moving average is in a short (long) arrangement, and the price suddenly starts to rise sharply (fall), and breaks all moving averages, we should be alert to a V-shaped reversal in the market. When the moving average is in a short (long) arrangement, if the price suddenly turns sharply and breaks all moving averages, then at least it can be understood that the market has entered a strong state, and it is a super strong or V-shaped reversal.

　　The strategy for dealing with a V-shaped reversal is: the original position goes first. If the price rises and breaks through the moving average, we can set a maximum tolerance moving average as the criterion for judging the market trend (my experience is usually 40 or 60 days) and enter the market. The trading volume should not be large, because the moving average is still going down at this time, and your stop loss is still expanding every day. If it is a V-shaped reversal, then a small order can also get a good return in a very short time. For a V-shaped reversal, our return requirements cannot be too high. For most people, in the V-shaped reversal market, not being caught means success.

　　Trends and corrections make up the way the market works, as it was in the past, as it is now, and as it will be in the future. A state of adjustment is equivalent to the market being in a state of thinking, thinking about its future direction, and a sharp fluctuation in prices is equivalent to the market being in a fierce ideological struggle, like a person in a room thinking about his future.

　　Once the consideration is mature, the market will break through the door and firmly emerge from the fascinating trend. The longer the market thinks and adjusts fully, the longer and larger the formed trend will run. When adjusting the state, we should give the market more time to think fully, rather than blindly guessing its future direction, because the market itself does not know its future direction. But once the market starts to break through the door, we must keep up. What else can we do?