Notes to the Forex Traders

As forex traders, we are constantly looking for any edge we can get in the marketplace.  Using the charts is one way that traders look for predictive behavior in the price action of any currency pair.  But sometimes, there are more simplistic tactics that can provide equal results.

Case in point, today’s action on GBP/USD.  This is one of the most simplistic “plays” in the market and can sometimes provide low-risk opportunities.  Today’s market action is called “No news is good news”.  This was one of the first tactics I learned when I made the transition to forex and it can be used over and over again.

Earlier this morning, the British pound rose some 80 pips from yesterday’s low volume session.  One might think that there was some “good news” driving the Pound higher, or perhaps there was some bad news about the other currency in the pair. Since the US market hadn’t opened yet, one might naturally conclude that there was good news in the UK then.

Not only was there not good news, there was NO news at all as the UK markets are closed today.  But the forex market trades 24-hours around the clock.  Without the possibility of bad news, the market saw the opportunity as good news and therefore pushed the Pound higher.  In other words, with the threat of negativity removed, you could have had an easier move higher!

Sometimes we see this type of action with the changing of the trading sessions.  Have you ever noticed, especially lately, that the markets seem to drift higher once the European market closes?  This happens because the risk coming from Europe is great right now so if we make it through a European session without negative news, the market sees it as a positive!

Of course it is still import to use support and resistance levels, and in the Pound earlier today that support level was at 1.56 providing a low-risk, high return short-term trade.  So trade the path to least resistance and you may see moves similar to this one today!