I’m going to compare a few markets that I’m watching right now. I’m not equally as enthralled with each but – if the risk is right – I’m game. I’m talking about the EUR/USD, U. S. Dollar Index, and AUD/USD.

But the bigger difference between each of these charts is their respective market trend. You can be bullish a market, bearish a market, and have no opinion about a market. The latter – no opinion – is where I am at with the EUR/USD (and the U. S. Dollar Index for that matter). Despite each of their recent dramatics, neither is going anywhere.

DX CHART Daily charts with no trending Directional Bias are account killers. Over the past two decades, hundreds of webinars, seminars, and working with traders, range-bound markets (when they go unrecognized) have emptied the most accounts among traders. The issue is that traders tend to categorize markets as either bullish or bearish but seldom neither. The problem with this is that often, when a daily chart does not have a trend, there is no dominant psychology ruling that market.

The AUD/USD is trending lower, nicely, hence there’s a clear direction, or Directional Bias. The Bias tells me if there’s an overall or dominant psychology in the market. The fact that the $AUDUSD has a downtrend on its daily time frame helps me with intraday time frame trade selection as well.

When the daily is trending (up or down) I can say that there is an overall opinion that is ruling the market and if there is one, my preference is to follow it. If I am going counter-trend, I will limit it to short-term time frames which to me means the five, 15, and 30-minute charts.

If I have an opportunity to short into a longer-term rally like the daily – since it’s in a downtrend – I’ll do it.

The process of finding clarity in a market has four steps and I’ll leave that to my next update. For now, start by asking, before you set up a trade: Is there a trending Directional Bias in the market I am looking to set up a trade in?

Forex Analysis by Raghee Horner at ForexPros. com