Like in warfare, we must also get a situation report on trading environment. This means we need to know what kind of market environment we are actually in. Some forex traders cry saying that their system sucks.
Sometimes the system does in fact…suck. Other times, the system is potentially profitable, but it is being utilized in the wrong trading environment.
Seasoned forex traders try to figure out the appropriate strategy for the current market environment they are trading in.
Is it time to bust out those Fibs and look for retracements? Or are ranges holding?
Just as the coach comes up with different plays for particular situations or opponents, you should also be able to decide which strategy to use depending on trading environment.
By knowing what market environment we are trading in, we can choose a trend-based strategy in a trending market or a range-bound strategy in a ranging market.