Do you ever wonder how banks and hedge funds trade? Ever heard of the contraction and expansion strategy? Please allow to enlighten you. We all know that the market is in consolidation 70% of the time and in lower time frames, those consolidation/Contraction usually happen during the Asian sessions when you are dealing currency pairs such as the EURUSD, GBPUSD, EURGBP e.t.c. As we begin the European and London session, the market tend to come out of the contraction phase and set a new low and this is sometimes interpreted as a signal to enter the market by retail traders and that's one of the reasons why retail traders aren't very successful at trading because they keep falling into the traps of the expansion phase.
During the expansion phase, the market usually sets a low/high and then quickly reverses to the highs?lows of the contraction, depending on what the trend is on a higher time frame, the market will follow it and the turning point is the middle line of the contraction.
This is one of the strategies that I day trade with my WhatsApp group and we will follow this market and react to it at every turning point.
Any opposing comment, views or arguments are welcomed!