The Forex Trader Safety Net
The Forex market can lure the novice Forex trader into trading scenarios that appear very attractive at first glance but turn very quickly into a losing trade. Many a Forex trader will relate to this experience:
Price has been in a consolidation channel for one or two hours.
You place an entry order to get taken in at the top or bottom of the channel.
Almost as soon as your trade is activated you notice it is down 10 pips. Minutes later that has gone to 15 pips. Before you can blink, your trade is out, having hit your stop loss.
It's ironic isn't it? Price was static almost for hours. Yet the minute your trade is entered price moves right against your position and you get stopped out. All you can do is scratch your head and exclaim: "What happened?"
In the early stages of gaining trading experience, it is good for the novice Forex trader to go by a checklist every time before entering a trade until certain habits become ingrained.
Just having a procedure in place that has to be executed before pulling the trigger on a trade can prevent the Forex trader from quickly entering a trade just because there are some sudden movements on the screen and the trader is worried about missing an opportunity.
It's true that having to go through a checklist may delay entering a trade so that the price moves on before we have chance to submit our order. However, the number of times this happens is quite rare whereas the benefits of waiting far outweigh the missed opportunity.
The following Safetrading Checklist can help a Forex trader identify high probability setups and therefore adopt a more cautious trading approach that has the emphasis on preserving account equity.
Safetrading Checklist
Avoid Long Trades If:
MACD on either the 4 hour, 1 hour or 15 minute time frames are showing negative divergence.
MACD is pointing down on the one hour or four hour charts.
Price is well above the daily central pivot point.
Price is bucking the trend on the 4 hour, 1 hour, and 15 minute time frames. (You can ascertain this by plotting a 200 EMA on these three charts and seeing if price is below it on the 4 hour and 1 hour but above it on the 15 minute.)
Price is above a Fibonacci 50, 62, or 79 retracement (calculated from the last high and low)
Your stop is not below multiple layers of support such as a significant previous high or low, pivot point, or Fibonacci level.
Avoid Going Short If:
The 4 hour, 1 hour or 15 minutes charts are showing positive divergence on the MACD indicator.
MACD on the 4 hour or 1 hour chart is pointing up.
Price is well below the daily central pivot point.
Price is bucking the trend on the 4 hour, 1 hour, and 15 minute time frames. (You can ascertain this by plotting a 200 EMA on these three charts and seeing if price is above it on the 4 hour and 1 hour but below it on the 15 minute.)
Price is below a Fibonacci 50, 62, or 79 retracement (calculated from the last high and low)
Your stop is not above multiple layers of resistance such as a significant previous high or low, pivot point, or Fibonacci level.
The Greatest Lesson Of All
Using a Safetrading Checklist list in this manner might mean you take fewer trades. However, the Forex trader hereby learns a very important lesson. What? PATIENCE! A Forex trader might find that simply waiting for the high probability trade to setup does take a lot of mental and emotional energy.
When it comes to the learning curve, this is probably one of the most important skills the Forex trader will have to master. A Safetrading Checklist forces the trader to just slow down and give careful thought and consideration to the array of indicators presenting a flow of information. Once the new Forex trader gets to this stage, real progress can start to be made. - 23196
Price has been in a consolidation channel for one or two hours.
You place an entry order to get taken in at the top or bottom of the channel.
Almost as soon as your trade is activated you notice it is down 10 pips. Minutes later that has gone to 15 pips. Before you can blink, your trade is out, having hit your stop loss.
It's ironic isn't it? Price was static almost for hours. Yet the minute your trade is entered price moves right against your position and you get stopped out. All you can do is scratch your head and exclaim: "What happened?"
In the early stages of gaining trading experience, it is good for the novice Forex trader to go by a checklist every time before entering a trade until certain habits become ingrained.
Just having a procedure in place that has to be executed before pulling the trigger on a trade can prevent the Forex trader from quickly entering a trade just because there are some sudden movements on the screen and the trader is worried about missing an opportunity.
It's true that having to go through a checklist may delay entering a trade so that the price moves on before we have chance to submit our order. However, the number of times this happens is quite rare whereas the benefits of waiting far outweigh the missed opportunity.
The following Safetrading Checklist can help a Forex trader identify high probability setups and therefore adopt a more cautious trading approach that has the emphasis on preserving account equity.
Safetrading Checklist
Avoid Long Trades If:
MACD on either the 4 hour, 1 hour or 15 minute time frames are showing negative divergence.
MACD is pointing down on the one hour or four hour charts.
Price is well above the daily central pivot point.
Price is bucking the trend on the 4 hour, 1 hour, and 15 minute time frames. (You can ascertain this by plotting a 200 EMA on these three charts and seeing if price is below it on the 4 hour and 1 hour but above it on the 15 minute.)
Price is above a Fibonacci 50, 62, or 79 retracement (calculated from the last high and low)
Your stop is not below multiple layers of support such as a significant previous high or low, pivot point, or Fibonacci level.
Avoid Going Short If:
The 4 hour, 1 hour or 15 minutes charts are showing positive divergence on the MACD indicator.
MACD on the 4 hour or 1 hour chart is pointing up.
Price is well below the daily central pivot point.
Price is bucking the trend on the 4 hour, 1 hour, and 15 minute time frames. (You can ascertain this by plotting a 200 EMA on these three charts and seeing if price is above it on the 4 hour and 1 hour but below it on the 15 minute.)
Price is below a Fibonacci 50, 62, or 79 retracement (calculated from the last high and low)
Your stop is not above multiple layers of resistance such as a significant previous high or low, pivot point, or Fibonacci level.
The Greatest Lesson Of All
Using a Safetrading Checklist list in this manner might mean you take fewer trades. However, the Forex trader hereby learns a very important lesson. What? PATIENCE! A Forex trader might find that simply waiting for the high probability trade to setup does take a lot of mental and emotional energy.
When it comes to the learning curve, this is probably one of the most important skills the Forex trader will have to master. A Safetrading Checklist forces the trader to just slow down and give careful thought and consideration to the array of indicators presenting a flow of information. Once the new Forex trader gets to this stage, real progress can start to be made. - 23196
About the Author:
Learn how to use the MACD Technical for safe trading. Click here: MACD Technical Know your candles! Use the free Candle Charts Instant Recognition Library here: Candle Charts
posted by X - Men @ 12:16 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home