3 Steps to Better Trading
Forex Strategies VIP
1. Trade the Trend
You've likely heard the saying, "The trend is your friend." This is true! But for this trading system, the trend won't just be a friend, but our best friend!
Therefore, trades must be placed in accordance to the Daily directional bias (main trend). Counter trend trading is not allowed in this thread.
For example, if you are trading the 4HR, then you should be using the Daily trend as a directional guide. If the Daily directional bias is ‘strong bearish’, then you should only be looking for selling opportunities on the 4HR, and vice versa.
I recommend nothing lower than the 1HR for this trading system. However, I do not have a rule against it. You trade the time frame YOU are comfortable with. Just remember that the lower you go, the more noise there is, and the more noise there is, the greater your risk will be due to false signals.
To be sure everyone posting chart analyses in this thread is following this rule, I am making it a requirement for each person who desires to share his or her ideas to post a Daily chart showing a 50 SMA or 100 SMA or 200 SMA. You need not have all three. Only one.
For example, suppose you share a trading idea from a 4HR chart, you will also be required to share a Daily chart besides your 4HR chart using at least one of the SMAs given above to prove you are following the Trade the Trend rule. In other words, if you use a 50 SMA and price is above it on the Daily, then you should only buy. If it is below it, then you should only sell.
Note: if you use more than one SMA, then only the highest one will be counted. So if you have a 50 SMA and a 200 SMA, then the 200 SMA will be used to determine the Daily directional bias.
The requirement to share a chart using an SMA to identify the Daily directional bias only applies to initial trading idea posts. If you have already clearly defined the Daily directional bias on a previous post, then you need not include it on posts where you share additional information related to that specific trading idea.
It is recommended you find a multiple time frame trend dashboard indicator that allows you to easily see where the currency pairs of your choice are in relation to the SMA(s) you use.
It is also recommended you use a multiple currency strength meter. This will make it easier for you to quickly locate trading opportunities. There are free ones available online here and here.
2. Wait for Confirmation
Whether it be breakout levels, trend lines, price patterns, candle formations, divergence, whole numbers, pivots, or something else, it’s best to have some means of confirming a trading bias.
Too often people enter a trade because they are afraid of missing out. Instead of creating a plan and carrying it out, they dive into a trade without a thought. I call this ‘candle chasing’.
Don't be a candle chaser! Candle chasing usually doesn’t end well.
Instead of chasing candles, be patient and wait for YOUR conditions to unfold. Don’t worry about missing out. There will always be opportunities to buy or sell at fair price.
Be patient and wait for YOUR price. And when it comes, seize it!
What good will it do if you enter early only to discover you’ve gotten sucked into a false breakout? Better to enter a little late and miss out on a few pips than to lose your money on a trade that was wrong from the start!
In other words, it's better to develop the discipline of patience and learn to be a winner than to gamble your money away on thoughtless trading.
Less is more!
Having said that, some people only trade certain price patterns or candle formations. While that may work for them, I prefer to have several ways of confirming a go signal.
At this time, I use one or more of the following to confirm a trade: Divergence (RSI set to a period of 7), how price reacts to psychological levels and / or weekly pivots, market profile, engulfing candles and pin bars (best on higher time frames).
It’s up to you to determine what to use to confirm a trade. This is something you will have to decide on your own. Let experience be your teacher.
Before hitting that buy or sell button, ask yourself why you're about to place that trade. If you can’t come up with a justifiable reason for it, then you are likely doing it out of fear of missing out when you should be waiting for confirmation.
Wait for confirmation!
3. Stick to YOUR Plan
It's easy to lose focus in a forum where people are sharing their own trading ideas. Where there are differing views, there is confusion.
Have you ever had the direction of a trade right but allowed someone else’s idea to influence you to go against your gut?
You were bullish and making pips. Then market conditions suddenly became turbulent due to some news. Bearish thoughts surfaced from people whom you thought you could trust. So you got out while you were still able to get some pips only to discover you were right, and they were wrong.
Price moved another hundred pips in your original direction, but you were no longer riding the move. You figured you could just get back in on a retracement. It looked like your opportunity to jump back in was knocking at the door. So, you hit the buy button only to watch price reverse hard against you, thrusting you into a losing trade.
The bears who got you off course were right, but their timing was off. And you were initially right, but you didn’t stick to your plan.
I have gone through something similar more than once.
I didn’t lose because I followed my plan. I lost because I didn’t have enough confidence in myself to see it through to the end.
You must learn to be confident. Learn to walk on your own. If you piggyback on other traders and eat their fish, then what will you eat if those traders aren’t around anymore? You will go hungry.
I’m not saying you shouldn’t learn from other traders. What I am saying is don’t become dependent on them.
Learn to Trade YOUR plan and stick to it!
If getting out of a trade early is not part of your plan, then you should stay in the trade. I'm not saying you should ride losers if the chart is screaming at you to turn back. If you have an alternative exit strategy, there is no harm in that. You should have an alternative exit strategy, because things don’t always go as planned.
But if you don't have an alternative exit strategy, then keep the trade open until you have reached your limit (usually measured by a stop loss).
Just because a trade turns against you, it doesn't mean it won't turn back in your favor. There have been many times I got out of trades too early only to regret it. I could have won big but lost because fear and impatience got the best of me.
You must withstand the psychological pressures of fear and impatience. Fear and impatience tell you to run away when conditions become uncomfortable. As a trader, you must expect to get shaken up from time to time. It comes with the territory.
Fear and impatience can ruin a trader. You must overcome these things to become a consistently profitable trader.
If your plan didn’t work out, then take a closer look at what happened and see if there was something you could have done differently. Look for ways to improve your strategy.
But once that plan is put in motion, let it run.
Stick to YOUR plan!
Conclusion: My challenge for you is to post your trading ideas and explain what your plan is as briefly as possible. Don’t just throw a chart up and expect people to figure it out. We aren’t mind readers.
And don't worry about getting it wrong. You have nothing to be ashamed of if things don't work out. We are here to learn from each other and grow together. We are going to make mistakes along the way. It happens to the best of traders.
Remember, it’s not about showing how great you are at trading. It’s about improving yourself as a trader, about developing a trader's mindset, about overcoming your emotions, and about become more disciplined in your approach to the markets.