On a macro level, the markets are showing a business cycle of trough, expansion, growth, peak, contraction, back to trough. But, not in the regular five to ten year timeframe; currency markets are doing it on a weekly, and sometimes daily basis.
The move from an average 8 years to complete a cycle is now running every 8 hours, and that is the way it will stay until volume increases and the 4 hour chart ranges break. The equity bear is knocking hard now, and has already visited Russian markets, and unless volume picks up to form a support base we may be dealing with macro business cycles for a little while.
The near-term answer is to over-prepare, and then go with the flow in selling test of resistance, and buying the tests of support, using the previous session's highs and lows as the main price point areas. However, the tests need to happen in-line with the Asian, European, and U.S. market opens and closes.
Move out to the 4 hour chart, pick up the obvious swing points (pin bars, trend-lines, Fibonacci areas, price action reversals, etc), transpose those onto the near-term charts and look for previous session High/Low tests of those price points, to trade the buying of support and selling of resistance.
Example from TheLFB Signal page:
Cad moved to the bottom of the 4 hour chart channel, hit the 50 day SMA area, formed a reversal 4 hour Pin Bar (shown left), and did it all on a day that equities and oil were weak, and Canada was on a Bank Holiday.
The subsequent break was signaled, the numbers prepared, and the bounce off the previous session low confirmed that it was likely to be ready.
We over prepared, and went with the flow as it broke. Now, the obsticle was that it broke ahead of the ECB and NFP, and therefore a decision to hold it or not was part of the preparation, the flow actually turned in a 120 pip move.
There will be a day that the ranges break, and a trending market starts, and that is the day that the stops will get hit. But, until then, and so long as volume remains at pathetic levels, there are plenty more of the range trades than break-outs.
Preared now? Ok, let's go with the flow then...
This is a traders market right now, one that suits reactive, contrarian thinkers who are prepared to take a shot at the links that drive forex values actually holding for more than 30 minutes. In reality all that is being offered at the moment is short, sharp bursts of order flows that break up a choppy market, and then reverse as quickly as they hit.
It is not good to look at, sometimes frustrating to look back on, but it is there for those who are ready to work with what is right in front of them, rather than trying to deal with how they want, or think, things to be. This may last until equity volume picks up, and we have to accept that new market-wide rules are being written each day.
Over Prepare and then Go With The Flow; sell the test of resistance, and buy the tests of support, using the previous session's highs and lows as the main price point areas to work from.