The Survival of the Fittest (and a possible 10% of return trade)

fittest

“The Survival of the fittest” is a phrase that originated from an evolutionary theory as way of describing the mechanism of natural selection (wikipedia).

But it can also be applied to other contexts, “fit” refers to “best adapted to the current environment”.

I believe that it can also be applied to the markets.

A trader that gets positive results is a trader that adapts to the current market condition. There is just no other way to get consistent results.

The market is always changing, each currency pairs is always changing, today any instrument might behave differently from how it behaved yesterday and different to the way it will behave tomorrow.

So its always about trying to adapt to the way the market is trading right now, it doesn’t matter how it traded yesterday… its all about today.

Here is a good example.

EURUSD Analysis

Let me show you this chart:

EURUSD 1D

When you look at it, its quite simple to determine what the market is currently doing, and what it is likely to do.

The upper resistance level (1.1429) wasn’t that easy to draw, because the market has been rejected only once from there.

What tells you that the upper rejection wasn’t a random rejection?

In order to answer that question you need to understand what happened in the short term charts once the market gets close to an important level…

If you have been following my articles, you already know the answer… Most of the times, when the market gets close to an important long term level, it will range on the short term charts.

That means that, if you switch over to the short term charts when the market gets close to an important LT level, most of the time you’ll see a short term range…

And this is how the EURUSD behaved in the short term charts, while it was close to that long term level:

EURUSD 1H

Its clear that the EURUSD traded around an importan level, that’s the reason it traded in a range.

It was risky to take a trade it right away after the EURUSD broke though the bottom of the range. Its always better to wait a little longer…

And now, that the market has already moved in that direction, it would be safer to look for your trade.

EURUSD Short Signal

Here is where I took my trade yesterday (called at the trading & analysis session of the Intensive Course).

As you already know, when the market is trading in a clear condition, the only thing we should do is to look for an excuse to either go long or short.

In this case, since the EURUSD is trading in a bearish condition, we are looking for excuses to go short.

And here is where we found our signal:

EURUSD 15M

The signal was triggered on the breakout of the short term range, here are the details of my order:

Entry: 1.0943
SL: 1.0978
TP: 1.0557

We always risk 1% of our accounts on each trade, since the risk reward ratio in this trade is 10:1, the profit potential form this trade is 10% Not bad ha?

Do you think the risk was well worth it?

I think it was…

And the same happened with other pairs, such as the GBPUSD and AUDUSD, we had to adapt to the market conditions so we can trade based on what the market is currently doing.

Your turn

Do you adapt to the market conditions?

Are you currently trading the EURUSD? What’s your take?

What other currency pairs are you trading/monitoring?

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Raul Lopez

I’ve been trading the markets for more than 15 years. I believe the best way to trade is by adapting to the market conditions. You can learn it too, join our community .


  • Eviano

    Check out the NZDUSD on daily chart.

    There is now a breakout on 15 minutes chart

    • hira

      I am short from the pinbar working very nicely

  • hira

    Hi raul what do you think about the usd about to make a huge drop I was just scoping the index what do you think … if it does anticipate what could highly happen here theres alot of money to be made if it makes that next leg . Its sitting at absolute key level and is firing a few hints at me …

  • seb

    Hi Raul, so you wait for a second range breakout after the first on at S/R in the same direction? What are your rules on the trigger candle? thanks

  • Eviano

    Good one I must confess. Please, what do you say of EURNZD?

  • cassyd

    wonderful way to analyse the market. It’s really a great article. In simple terms ‘Price Action’. Beautiful indeed. thanks man. Well myself I am trading usdjpy, audusd, and more and good enough am in profit.

    • Raul Lopez

      AUDUSD is a good one to look for shorts… USDJPY is too close to the resistance level, be careful about that pls…

      good luck!

      • hira

        Yes very nice I found a set up on audusd thanks raul ….

        • Raul Lopez

          Congrats!!!!

  • hira

    Hi raul I agree the first thing I would look for at key levels is watching the momentum shifting and the price action and then possible comfirming price action on the lower charts … from key level . when its a confirmed momentum shift I further watch for trend development with price action as my guide also … so yes if you can identify current conditions and trend development you know witch way you need to go … thanks for the article raul keep up the good work …

    • Raul Lopez

      Could not have put it better Hira! Thank you for your comment!

      Good luck!