For traders there is something uniquely compelling about about a range bound market such as the AUD/USD. For the amateur they are akin to a sirens call telling that there are endless profits to be gained simply by buying and selling inside the range. For the professional they are clearly marked no go zones.
From my perspective congestion seems to frustrate trades and to be honest I have never understood why this might be so. Congestion offers one of the clearest trading signals you will ever encounter and i have to confess I have not traded this particular pair for probably close to a year. the reason for this decision is simple. As an end of day trend follower, its not trending.
This becomes blindingly obvious when you look at the chart below.
Undoubtedly there will be traders who are beavering away inside this zone taking every possible signal. They may actually be making money but then again they may be simply entertaining themselves for this afterall is the prime motivation of a large majority of traders.
Whilst, congestion does cause many anxiety if you look at the chart above the various courses of action for the trader are narrowed to two. Buy on breakout, sell on breakdown. Congestion should be comforting not confronting since it is a clear signal to firstly do nothing and then a clear signal to do something.
As an aside compare the clarity of this chart with the noise that is generated by the following news snippet from Google finance.
These were just the first handful I copied this morning. Trading at its core is an information management profession – your success is dependant upon how you manage the various sources of information that flood onto your screen each day. I was complaining to LB yesterday whilst we were having lunch that my phone wouldn’t update its quotes quick enough (read the moment I pushed the button). I stopped complaining when I remembered the good old days when it was impossible to get overnight prices and orders from overseas came by telex. But this immediacy of information creates a problem and that is one of overload. Sorting the relevant from the bullshit can be hard for some.
I think though there are some simple steps that can be taken to alleviate this problem. First and foremost is dont use any information you did not generate yourself. This automatically cuts out the financial media which can only be beneficial for your trading. Secondly, get used to doing simple things. The chart above is my actual trading chart of the AUD/USD. It is the one that I will use to guide my actions when the time comes. You will note it is not plastered with friggen lines and magic indicators. It has two lines on it and these tell me all I need to know.
My mantra is simple – when in doubt draw a bit fat line and wait. Pioneers are the ones with arrows in their backs.