Tuesday, July 29, 2014

Low volatility, high volume candles

I'm still practising my daytrading on the AUDUSD. What I discovered with my forecasting was that it made me biased with the direction and size of my trades. I'm not sure if it was doing any good. My forecasts on volatility have been consistently close, but forecasting direction is more difficult. 

The lack of volatility on all forex pairs has also been awful. Yesterday, the AUDUSD only ranged 29 pips. I knew it was going to be quiet, given it was Monday and there'd be a lack of news. If you're the type of daytrader who trades breakouts, you'd be getting burnt time and time again. 

Range-trading methods are probably ideal in these low-volatility environments. I spotted low volatility, high volume candles which act as good entry signals near support / resistance zones. The contraction in volatility and spike in volume gives us two pieces of evidence that buyers / sellers are moving in at support / resistance. I marked the candles that have a smaller range and higher volume than their previous candle, near a S/R zone. Trading the break of these candles would've resulted in a win for most trades, provided that you traded within the S/R range. 

(click below to enlarge)

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