Recently, the forex trading market has been exceedingly choppy, with the price action of many major currency pairs vacillating between support and resistance levels without much rhyme or reason behind the movements. It’s a major challenge for the forex trader, particularly those new to the game, to escape the moods of the market with one’s account intact; however, there are a few tricks that can assist traders in maintaining their position within the market.

1. When the markets are choppy, it’s safest to concentrate on only a few currency pairs, preferably those with a high correlation between them, such as EUR/USD and USD/CHF or EUR/GBP and GBP/CHF, with correlation measurements currently around 98 on one-hour charts. Get to know the characteristics of these pairs, and take the time to identify major support and resistance levels prior to opening a trade.

2. Memorize the calendar of economic announcements for those currency pairs and don’t get caught on the wrong side of a trade following one. Often a particularly choppy movement will originate when market sentiment is caught off-guard by an economic announcement supporting the opposite view. If this should happen and the market moves against a trade, be ready to cut losses, perhaps re-entering in the opposite direction with a correlation pair.

3. Don’t expect any sustained or long-term movements. If a fair profit has been made, take the trade out of the market or risk losing the position, especially if the price action is approaching a support or resistance level.

4. Hedge trade channels for a potential breakout in either direction. As the one-hour chart of AUD/USD, below, illustrates clearly, much chop in the forex trading market combines to form range-trading channels, which sets one up nicely for a breakout. If there’s no clear indication as to which direction the market will take, place hedging entry orders, a long one above and a short one below the channel, greater than one standard error from the linear regression line to prevent spikes from triggering the orders accidentally. Meanwhile, ride the action within the channel and gather pips on the short movements with day trading.

5. Program in a five-period moving average channel calculated on the high and low prices, and check the price movement on the four-hour charts. If the heikin ashi form doji or spinning tops within the channel, expect the forex trading market to be particularly tough.

The long horizontal movements in the GBP/USD four-hour chart below translate into a series of vicious sixty-to-eighty pip moves that change direction without warning on the one-hour chart on bottom. By the time a clear entry signal has been received and a trade entered, the market has changed its mind and is moving south. The tendency is to close the losing trade and re-enter the market in the opposite direction, with the hope of recouping some of those losses; the usual result is greater losses.

To paraphrase noted trader and trainer Dean Malone of CompassFX, sometimes it’s simply best to step away from the mouse and put one’s hands in one’s pockets. When the market is particularly ruthless, sometimes one must simply walk away.