How is today's FX? ~ Trade tips to enjoy trading even in the midsummer lull ~

Hello! I’m Neko-kai from the Trade Idea Lab. Thank you for reading as always.

“How about today’s FX?” Today, I’ll be a bit serious but keep it fun as I talk about the summer doldrums in FX. In the hot summer, activity slows down and trading can feel boring, but rather than stopping, I’ll share tips to approach it with interest and ride it out!

What is the summer doldrum market in the first place?

The “summer doldrum market” refers to the period from July to August when market volumes shrink and moves become sluggish.
Many market participants, including sea-based traders and institutions, go on vacation, so participation drops and market vigor fades.
You might think, “Shall I just stop trading?”, but actually you can have an interesting trading experience by being creative here.

Today’s USD/JPY is hard to move around 147 yen due to options near that level

Even in such summer doldrums, USD/JPY finds it hard to move because large options near 147 yen are exerting their effect.

“Options? What are those?” is a question many people have.

In fact, FX isn’t just about buying and selling currencies; it also involves strategies using option trading, which gives the right to buy or sell at a certain price in the future.

Options traders wield a lot of influence in the market. When there is a big option wall around 147 yen, the market finds it hard to break through that price.

Incidentally, last week’s 300-pip drop in USD/JPY was largely influenced by these options.

Why 147 yen? Options are the key to the market

Why is there a concentration of large options around 147 yen?

Because institutional investors place importance on this price.

Many people might not know this, but the FX market isn’t driven solely by simple buying and selling; walls created by options trading can also influence market direction.

Trading FX without knowing this can cause you to miss important hidden information and take losses in unexpected places.

Today there are US ISM Non-Manufacturing Index and US Trade Balance releases… but…

Today there are releases of the US ISM Non-Manufacturing Index and the US Trade Balance, so usually this would be a day with big moves expected.

However, Trump is again shouting that “the Census Bureau is unreliable! Fire the director of the Census!” (laughs), so whether the data is good or bad, the market is likely to be subdued.

Well, this happens every year. Being swayed by politicians’ remarks is part of the charm of FX trading… no, it’s also a challenge.

Backdrop of the summer doldrum: shrinking real demand and rise of algorithmic trading

The summer doldrum is hard because real-demand trading (trades based on the real economy) diminishes from July to August.

In its place, the market is heavily influenced by algorithmic trading using AI and high-frequency trading (HFT), and by headlines from news.

In short, systems that catch favorable information faster than human senses become the main players.

Three strategies to use in such times!

Now that you know the features of the summer doldrums, I’ll introduce three trading strategies I recommend.

1. The Do-Nothing Strategy

First, simply “do nothing” can be a valid strategy.
If the market is unclear and movement is hard to predict, you don’t have to force trades.
This “courage to not act” is surprisingly difficult. I understand (laugh).

2. Scalping Strategy

Next is scalping.

But there are broad and narrow definitions of scalping.

• Narrow definition of scalping: ultra-short-term trades from a few seconds to a few minutes

• Broad definition of scalping: short-term trades from a few minutes to a few tens of minutes, stacking small profits

I’m using the broad definition here.

In a summer-doldrums market with small moves, it’s suitable to target and capture fine price movements.

3. Liquidity Sweep Strategy

Finally, a term you might not be familiar with: the “Liquidity Sweep Strategy.”

Simply put, it’s a method that targets points where market liquidity concentrates and moves the market there to take profit.

For example, you aim at price zones with lots of limit orders piling up and move quickly from there to gain profits.

Many may wonder “What is liquidity?”, so I’ll explain this in detail in future blog posts.

Summary: The summer doldrum market is boring, but can be enjoyable with knowledge and strategy!

Today I introduced the behind-the-scenes movements of USD/JPY in the summer doldrums, the importance of options, and three strategies to ride them out.

Honestly, the summer doldrum can be difficult and quiet, so it may feel boring.

But if you understand the market’s mechanisms and background, you may find it fascinating and an opportunity to upgrade your skills.

If you think, “Shall I skip trading today?” that can also be a valid strategy.

Also, in future posts I’ll delve deeper into the “scalping strategy” and the “liquidity sweep strategy” I touched on today.

Everyone, please overcome the summer doldrums without overextending and enjoy it!

P.S.

Watch out for summer heat! I recently, succumbing to the heat, ate three ice creams in an air-conditioned room, and my stomach was surprised (laugh). Balance is key in both trading and health!