How To Trade In A Dead Market

Market volume and volatility go up, and they go down.

Sometimes they go down and stay down.

We’re trend traders, we need volume.  We’re no longer getting what we need.

So what do we do now?

How To Know If Enough Volume Is There?

First of all, there is a tool to determine what the Volume/Volatility is in the current market, this is it.

You can set your own base on this tool in order to trade with your maximum risk level (mine is 1%) and I determine at what level my risk should be. If on the Eurofxvix, volume is above 7, my risk per trade is 1%, 6-7 is 0.8%, 5.5-5.99 is 0.6%.

Anything below 5.5, I consider to be a dead market and will either only risk 0.5%, or I won’t trade at all. There will be times when volume falls well below it, and stays there.

Just like it is right now.

Not only is it low, it’s staying low, close to the “5-5.5” range, it has been this way since the beginning of June!

This is not ideal.

We need volume, and it’s just not there.  And we don’t know how long it will remain like this.

Use This Situation To Your Advantage

This is not the market we want, but we can use this time wisely and productively.

Many of you are testing your own systems for the first time, whether it be back-testing or forward-testing.

Would you like to know how well your volume indicators work?  Have a few you’d like to test in real time?

Test them now.

They should be telling you not to trade.

If they’re giving you the green light to trade as of right now, July 13th 2021, this is probably not an indicator you want to be relying on.

Volume isn’t there, and guess what, almost no pairs are giving you that nice follow-through we want as trend traders, nor have they for many days now. It’s a pain.

If You Are New To Trading

And you’re testing your system for the first time, and it’s not yielding a whole lot, or giving you a lot of losing trades, THIS IS NORMAL.

It’s a dead market, or pretty close to one. These happen, and you just happened to start trading as one was occurring. It’s natural chaos theory — order (what we have now, a ranging/dead market), into chaos (what we want (trending prices)), and back again.

Do not be discouraged.  Those nice gains you were seeing in the backtesting phase will come back.

But you MUST know what to do in the meantime, or else you’re just going to give all of those wonderful gains right back.

So What’s The Plan?

There are a lot of ways to approach dead markets.  But there is only one I recommend….

DO NOT TRADE

It sucks, I know.  But do you know what’s worse? Burning away your money for no good reason in a range-bound market. This is a death-trap for trend-traders.

You should NOT be getting many trade signals right now.  But if you are getting a few, here are a few things I’d strongly suggest you consider.

Trade Smaller Time Frames

Is there no follow through on the larger time frames?

There probably is movement and follow through on the smaller time frames however.

My system will work on just about any time frame, as does the money-management system, just not as well as it does on the Daily.

So under these circumstances, trade those lower time frames that you’ve always wanted to trade.

Just don’t be shocked if the results fall below your expectations.

You’re now dealing a lot of crap (more news, sessions, the way the Big Banks handle intraday moves, etc) that you weren’t before.

Take The Entire Trade Off At Your First Take Profit

Why?  Because the chances of it going any further are fairly small, and we’ve already seen this.

Take your small wins now.  Stack those up.  You never know when you’ll need them to cancel out your losses.

If price keeps going, then it is what it is.  Good discipline is good discipline, and this will always be rewarded in the end.

Understand That You Are Going To Miss The First Big Move

Once volume decides to stop being a dick and comes back to us, chances are, your Volume Indicator won’t be fast enough to catch this move.

Again, it’s the price we pay for great discipline and smart trading.

Learn to accept this probable reality.

If anything, be excited!  This just might our volume coming back for good!

Conclusion

There isn’t anything worse than getting big gains, only to give them back because you were reckless and unprepared.

Now you’re prepared.

So if you still trade recklessly and you give away your money now, you’re just foolish.

And a fool and their money are soon parted.

I can’t really help there.

Anyway, happy trading and stay wild…

–TheWildtrader

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