Forex Trader Safety Checklist
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 channeling for a couple of hours, in consolidation.
In an attempt to get taken into a trade at the top of a channel you place an entry order at a strategic place.
Within a few minutes your trade is in and within a few minutes more you are looking at a loss of -10 pips, then -15 pips, and then your stop gets taken out.
Isn't it amazing. Price has hardly done anything for hours. Yet the moment your trade is entered price moves dramatically against you and your trade hits the stop leaving you bewildered and thinking to yourself, "Whatever happened?"
A new Forex trader can avoid a lot of heartache by developing a Safetrading Checklist. This will help with gaining experience so that good trading methods become habitual.
With a set procedure in place, the Forex trader is protected from jumping into ill-thought out trades just because there are dramatic candle movements on screen and the trader is afraid to miss the boat. With a procedure, the trader only pulls the trigger when certain criteria are met.
This may of course delay things as you go through your checklist and you may end up missing an opportunity while you make sure all the criteria are met. But better to miss the occasional opportunity than regularly go into trades in a rush and regret it.
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 Going Long If:
The 4 hour, 1 hour or 15 minutes charts are showing negative divergence on the MACD indicator.
MACD is pointing down on the one hour or four hour charts.
Price is well above the Central Pivot Point for the day in a Sell Area.
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 Short Trades 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 Central Pivot Point for the day.
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. - 23162
Price has been channeling for a couple of hours, in consolidation.
In an attempt to get taken into a trade at the top of a channel you place an entry order at a strategic place.
Within a few minutes your trade is in and within a few minutes more you are looking at a loss of -10 pips, then -15 pips, and then your stop gets taken out.
Isn't it amazing. Price has hardly done anything for hours. Yet the moment your trade is entered price moves dramatically against you and your trade hits the stop leaving you bewildered and thinking to yourself, "Whatever happened?"
A new Forex trader can avoid a lot of heartache by developing a Safetrading Checklist. This will help with gaining experience so that good trading methods become habitual.
With a set procedure in place, the Forex trader is protected from jumping into ill-thought out trades just because there are dramatic candle movements on screen and the trader is afraid to miss the boat. With a procedure, the trader only pulls the trigger when certain criteria are met.
This may of course delay things as you go through your checklist and you may end up missing an opportunity while you make sure all the criteria are met. But better to miss the occasional opportunity than regularly go into trades in a rush and regret it.
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 Going Long If:
The 4 hour, 1 hour or 15 minutes charts are showing negative divergence on the MACD indicator.
MACD is pointing down on the one hour or four hour charts.
Price is well above the Central Pivot Point for the day in a Sell Area.
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 Short Trades 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 Central Pivot Point for the day.
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. - 23162
About the Author:
Master the MACD Signal for safe trading. Click here: MACD Signal Learn to use candles! Use the free Candlestick Pattern Instant Recognition Library here: Candlestick Pattern
posted by X - Men @ 12:15 AM
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