The trickiest period to trade a particular market for me is when it is going through distribution. Distribution is when a market is topping, or bottoming, and is marked by frequent and wide price swings -- think up big one day, and down big the next. The EURJPY chart below is, I believe, an example of distributive price action as market professionals exit long-term positions one day, forcing the market lower, and shorter-term, more speculative traders entering new positions the next, running prices back up.
Distributive trade is by nature counter-trend, or sideways trade, and when you drop down to the shorter-term charts marked by spiky candles with small bodies which reflect market indecision.
If you think about it, this type of trade is actually tailor-made for slowing holiday trade, and while not the best environment to operate in, not such a bad arena to trade in if you recognize the signs.
Chart courtesy of eSignal
John Jay Norris
Senior Market Strategist
Brewer Futures Group, LLC
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