Adapting to the trading environment…

As traders, we need to be able to adapt to what the market is doing. For example, being a breakout trader in a sideways consolidating environment is not likely to yield too much profit. We have to be able to read what the market is doing in order to apply the right trading dynamic which is most suited to it.

Let’s take rugby as an example. Last weekend, England were playing Australia and in the first 30 minutes it was evident that our game plan wasn’t working. The Australians were running at us fast and breaking our defensive lines. Many coaches would wait until at least half time before trying to make any tactical changes but the England manager Eddie Jones spotted the problem and made a bold move by bringing an England player off and replacing him with the view to adapting to what was happening on the field early.

This swift action shored up the England defence and tactically, England could now play in a way that allowed them to get back into the game and actually secure the biggest score they’ve ever had in Australia.

It’s exactly the same with trading. We also have to play ‘heads up rugby’. We need to adapt to what the market is doing and employ the right strategy at the right time. This is why multiple timeframe analysis should be part of every trader’s work. Using a top down approach that allows us to see the bigger picture. If we just use a singular approach, we don’t always see the woods for the trees.

That England rugby manager did indeed spot the bigger picture of what was happening in the game. He made changes early, adapted his technical approach and as a result the game was won. Trading is no different, heads up trading wins the game….

Over to the markets, The AUD/NZD currency pair has sold off strongly since late April and looking at the weekly and monthly timeframe, it has broken last Octobers low. Next technical support on that timeframe is the April 2015 low which is down around 1.0050 which is 400 pips lower than where price is now. Although this is larger timeframe analysis, the stage is set over the coming months for price to attempt a run at those lows…


Have a great week

Charlie Burton


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