A Few tips On How To Catch The Trend On The Forex Charts

Hello and welcome to another edition of the bulls  and the bears. Today I am going to show you a few tips on how to catch the trend on the forex charts. As I indicated in one of my earlier articles,What is Price Action Trading? no magic indicator, fancy robot,or any snazzy software can help you identify the trend. The forex market pretty much has a mind of its  own. It can turn on you  the same way when lightning strikes. So  the best thing you can do is to look out for the most obvious direction the market ie to take.

Now some of you are probably going like”How can I tell which direction the market is going?” Well you employ a concept aptly called TLS. Basically you  employ a sweet cocktail of trend analysis. Let’s  be clear: Weare not going  to learn how to trade a trend here(You can catch that on Trading Trends With Price Action Analysis).We are merely going to figure out how to catch the most obvious direction the forex  is taking.. We will start with the less complicated techniques and then work our way  to the advanced ones.

First:

Your Price Chart Should Be Free of Indicators  

If you want to catch a   trend without pulling your hair out, just observe a price chart free of indicators.You need to understand that trend identification is not rocket science. You only need to  keep it as simple and sweet possible.  One way of doing that is  watching a naked price chart free of those scary-looking tools called  indicators. Probably the most important  trend to keep your eye on is the daily chart trend. And by the way,you will be employing both short-term and long term analysis.

There is one important question you need to ask yourself when doing this analysis, And it is “What is the chart looking like between the last three months and two years? This is important because this give you a  clear idea of where the chart is headed. And you make sense of this pattern in terms of its movement from left to right on the chart. Now if that doesn’t pan out, just pull up a daily or weekly chart and ask yourself a very important question: Is this chart falling or rising? No need to  sweat the technique on this one.

Let look at the price action of EUR/GBP pair

Image result for forex - identifying trend on price action chart

 

It’s pretty obvious that the overall trend is on heading upwards. However, take a close look at the countertrend retraces or pullbacks within the uptrend.  Check out How to Trade 50% Retracement Strategy with Price Action Analysis

Next Up:

Look For Swing Highs and Lows

Look for the most obvious swing highs and lows. One thing about trends on the markets, is that they leave swing highs and swing lows in their trail. Ever seen jet stream coming out of the exhaust of an airliner? That’s what it looks like when trends leave behind swing highs and lows. The sing highs and lows give you a clear idea which direction the market is trending. Let’s take a look at  a swinging illustration using the EUR/USD pair.

Image result for forex - swing highs and lows on price chart

As  you can the red labels represent the highs and the lows in the uptrend. You can see the swing lows  form a staircase as the trend rises. However, if it were a downtrend, you’d be focusing on the highs instead. In this case the Highs will be creating a staircase in the opposite direction – the downside.

Map Out Your Higher Highs and  Higher Lows, and Lower Highs Lower Lows

Now that you have marked the swing points on your chart, you can now ascertain whether the market is HL,HL or LH and LL.   You should be able to spot the obvious pattern of HH and HL for the uptrend and LH and LL for the downtrend. Let’s take a look at NZ/ USD pair.

Image result for forex - hh hl and lh ll

Voila! You see all the Highs and lows nicely layed out in the price action. Even better the uptrend is already in place. So you shouldnt have any problem identifying the highs and the lows. If you want to learn some more about hiighs and lows,look up Do A Little Swing Trading and Trade Trends With Price Action Analysis.

Next Up

Do You See Price Action Signals Forming?

You need to check whether there are price action signals forming on the  chart. That should tell you   which direction the chart is going.If you keep getting persistent signal failures that should tell you that the market is changing direction. Let’s take a look at such an illustration using the USD CHF pair.

Now this image shows a double bottom pattern as indicated by the blue lines.  Jus so you know the double bottom pattern is a bullish reversal pattern which takes shape once the bears run out of steam. The neck line, labelled in pink represents the price confirmation signal. The green circle represents price breaking the neck, which confirms the beginning of the bullish trend.

However, the price action does an unexpected 360, initiating a strong bearish move. This represents the price signal failure that I mentioned earlier. The  bears are basically saying”Not so fast we’re taking over.”  The moral of the story is  t thathe failure of this signal should clue you in as to a trend reversal about to take place.  For more information on how to separate good price signals from bad price signals, look up Price Confirmation Signals:Weeding The Chaff From The Good. And if you want to know about the double bottom pattern qand other chart patterns, Look up Trading Forex Chart Patterns Part II. You’d be better served looking up Part I also.

Look Out For Change in Trend Direction

Probably the most important factor you want to concentrate on is a change in the market trend direction. You want to pay particular attention to the swing highs, but first start with the swing lows. Why? Because, not only will you catch the overall trend, but through the price action, you should be able to tell whether the trend is holding or not.

Let’s say you have a series of Higher Highs and Higher Lows in an Uptrend. When you see price  break down past the previous swing low, it;s the strongest signal that the bulls are running out of breath. I’m sure you know that the downtrend is made up of Lower Highs and Lower Lows. So conversely when price  breaks above the previous low, it should tell you that the bears are running out of breath. In other words, the downtrend is coming to an end. Let’s take a look at  a typical change in trend  using the EUR/USD pair.

Image result for forex - Change in Trend Direction

This is a typical example of a changes in trend direction on the chart.  As you can see on the chart, the uptrend starts strong, and then runs out of steam, due to price breaking down at the previous swing low.  It’s the same situation with the downtrend.The bears start strong and then run out of steam because price breaks down at the previous swing high.

That’s  a wrap for ”A Few tips On How To Catch The Trend On The Forex Charts”   As you can see,  it’s not that complicated. Once you master the art of identifying the trend/direction of a market then you look for a signal or key level to make your entry.Just remember that the market does have a mind of its own, so you will be better served to ride with it.

Till then take care.

Looking To Join The Forex Trade Gravy Train?

If you’ve stumbled in here looking to join the forex trade gravy train, here is what you need to do . First,  look up  Why Forex Trade Is So Popular.  Next, you learn  the fundamentals of forex trading by reading  Forex Trading Basics – Top To Bottom Part I  and Forex Trading Basics – Top to Bottom Part II .Next, you need to learn how to read candlestick patterns. They are the main feature of price action analysis. And you need to know what these patterns are telling you. To be able to do that read the following on Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns,  Dual Candlestick Patterns, and Triple Candlestick Patterns .    Also You Need To Know Ten Of These Candlestick Patterns . And finally If you want to give your trading skills an edge by relying on pure price action trading/analysis,  instead of fancy forex robots and fancy indicators, get started with What is Price Action Trading? 

Looking to get a leg up on price action analysis,?you need to learn How to Identify Support and Resistance Levels.  And if you want to learn how to interpret trading zones, read up on Identifying Dynamic Support and Resistance Levels. Finally you should know  How To Read Candlestick Patterns using Support and Resistance Levels.

However, if you only want to trade once a month and watch your entry rack up huge profits over a stretch  of several weeks, consult  How to Spot High Probability Trades.  And if you  are  still not sure about  price action trading, find out   Why Price Action Trading Still Rocks . Dont let me stop you from reading the other posts as well. But the  suggested posts above are the most important posts to get  you started.

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Do you want me to send you the latest posts to your email address inbox?Then  subscribe to my mailing list and I’ll send my blog posts direct to your inbox. It wont cost you a penny.

P.S. if you want to know everything there is to bene know about price action trading   Download for free The Ultimate Guide To Price Action Trading by Rayner Teo. This brilliant ebook will change your life. It sure did mine.

And if you are looking for   a place  to put your price action trading strategies into practice(Including setting your level and margin), and get a simulated feel of  live forex trading conditions   before  trading live, open a free demo trading account with Easymarkets.  But  if you believe you are ready to trade live on the forex markets, open a forex trading account with EasyMarkets and get a free forex trading e-book.

 

 

 

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A Few Rules on Taking Profits From Forex Trades

Hello and welcome to another episode of the forex versus the bears. Today we are going to look at  a few rules on taking profits from  forex trades.  A lot of traders jump into trades like “Hmmm…I could make a lotta doe here.” Yet there is no thought process behind how they are going to mak that profit, or any profit for that matter. They rely on pure emotion rather than logic. Consequently, the market does a 360 on them, r and blows their trading positions to smithereens. And please don’t  blame it on the market. The market is, well, just being the market.

So here is what we are going to do. We will look at a few price set ups and how to profit from those setups. And then we’ll also look at mistakes you should avoid making when trying to profit from the market. By the end of this lesson you should know how to profit from your trades and mistakes you’d do well to avoid,

First off:

Impulse Vs. Sound Decision Making

The one thing you do not want do is to take profits based on emotional impulse. Instead, how about taking your profits based on sound decision., By  sound decision I mean you decide beforehand  where on the price chart you’re going to take your profit, based on an exit strategy. When you exit on emotion, you end up making smaller profits. Because you didn’t pre-determine your profit target, yo hit the panic button the moment the market turns against you. And when you panic, you end up with pocket change rather than a sack load of cash.

And here is another consequence of emotional trading. When you exit emotionally,you are looking to squeeze every last drip out of a trade. Such that even if a healthy profit is staring you in the face you won’t even notice it. But once you accept the cold hard reality that you cannot sweep up every pip there is ou there, you can set  your targeted profit and exit rather than panic at the last minute out of fear of the market crashing on your position.

Let’s take a look at a example of trading with emotion vs sound decision making

Image result for Taking profits on emotion

Take a second look at the second graphic.  This is an illustration of what happens when you sell your profits too quickly. You hit the panic button the moment you  sense(falsely this time) that the market is turning against you. If you had a pre-determined your profit target, there will be no need to  panic. Just wait for the price to hit your target and then you make your exit.

Now take a look at the first graphic.  Here you see sound decision making in effect.  Price has hit the profit target at the very top of the graphic. And once that happens you can pick your profits and head out the door. This can only happen when you  determine in advance  what your take profit in advance. In fact it should be part of your trading plan. Once you do that, there is no need to activate the panic button.. You will be laughing all the way to the bank.

Taking Profits In A Trending Market

There is no better feeling than taking profits in a strong trending market. It’s like hitting  home runs in a baseball game. Once you get hit that ball high into the stands there is no better feeling. It’s a same feeling when you’re taking profits in a strong trend. Once the trend seems to  go on forever, the profits just accumulate like coins in a piggy bank.

But how do you take those profits in a strong trending profit? Forex  wisdom has it you use a trailing stop( For more on trailing stop and other market orders). The only problem  her is that there no sure way of trailing your stop loss. Your stop will get hit no matter how hard  you try to trail it. The moral of  using a trailing stop is to give the market some room to breath while you pile up the profits. One way of trailing a stop is using the Exponential Moving Average(Look up Moving Averages I and II) We’ll take a look at the 5 EMA and 8 EMA. Let’s see how it’s done.

Image result for Forex - Take profits through trailing stop using ema

 

We have a crossover situation with 5ema and 8 ema. Here is what you do in such a setup. If you’re buying in the uptrend,just place your take profits at the close of the candlestick as indicated by the arrow inside the yellow stick.  When the candlestick is full, consider it closed.

But if you’re selling when the bears are heading down the slope(on the downtrend), Put in your order at the close of the candlestick, as indicated by the arrow in the red circle(I know it sounds repetitive,but bear with me).  And then place your trail stop about 5-10 pips above the candlestick. Like I mentioned,earlier, the whole idea is to give your trading position some breathing space while you rack up your profits.

How Do I Take Profits?

Well you can take your profits in  two ways:

  • Set your profit at least three times the risk on the current trade
  • Or you set your take profit at the previous swing low your bu of your sell order and previous swing high of your buy order. Not sure of swing lows and swing highs, look up Let’s Do  A Little Swing Trading.

How Do I Manage A Profitable Trade?

Well if you want to manage your profits on your open trade using 5 ema and 8 ema crossover, you could try the following options:

  • If you’re still hitting home runs on your trading position and you want to secure your profits move your stop loss and place it behind the high/low of each candlestick that forms. so if you are into short trades, move your stop loss and place it above the high of each candlestick that continues to create lower highs. You could try  a stop loss of loss 50-80
  • But if you are into longer trades, you move your stop-loss below the high of each candlestick creating Higher Lows. For a longer trade you’d be better off with a trailing stop of 25-40 pips.

That’s  a wrap for ”A Few Rules on Taking Profits From Your Forex Trades”   As you can see, it’s possible to take profits from trades if you do it the right way.You have to have a plan in place to take your profits instead of exiting on impulse  or in panic mode. When you do that you leave a lot of money on the table. So make sure you take all your cash instead of leaving some behind.

Till then take care.

Looking To Join The Forex Trade Gravy Train?

If you’ve stumbled in here looking to join the forex trade gravy train, here is what you need to do . First,  look up  Why Forex Trade Is So Popular.  Next, you learn  the fundamentals of forex trading by reading  Forex Trading Basics – Top To Bottom Part I  and Forex Trading Basics – Top to Bottom Part II .Next, you need to learn how to read candlestick patterns. They are the main feature of price action analysis. And you need to know what these patterns are telling you. To be able to do that read the following on Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns,  Dual Candlestick Patterns, and Triple Candlestick Patterns .    Also You Need To Know Ten Of These Candlestick Patterns . And finally If you want to give your trading skills an edge by relying on pure price action trading/analysis,  instead of fancy forex robots and fancy indicators, get started with What is Price Action Trading? 

Looking to get a leg up on price action analysis,?you need to learn How to Identify Support and Resistance Levels.  And if you want to learn how to interpret trading zones, read up on Identifying Dynamic Support and Resistance Levels. Finally you should know  How To Read Candlestick Patterns using Support and Resistance Levels.

However, if you only want to trade once a month and watch your entry rack up huge profits over a stretch  of several weeks, consult  How to Spot High Probability Trades.  And if you  are  still not sure about  price action trading, find out   Why Price Action Trading Still Rocks . Dont let me stop you from reading the other posts as well. But the  suggested posts above are the most important posts to get  you started.

Wanna Subscribe to My Mailing List?

Do you want me to send you the latest posts to your email address inbox?Then  subscribe to my mailing list and I’ll send my blog posts direct to your inbox. It wont cost you a penny.

 

P.S. if you want to know everything there is to bene know about price action trading   Download for free The Ultimate Guide To Price Action Trading by Rayner Teo. This brilliant ebook will change your life. It sure did mine.

And if you are looking for   a place  to put your price action trading strategies into practice(Including setting your level and margin), and get a simulated feel of  live forex trading conditions   before  trading live, open a free demo trading account with Easymarkets.  But  if you believe you are ready to trade live on the forex markets, open a forex trading account with EasyMarkets and get a free forex trading e-book.

 

 

Do A Little Swing Trading

Hello, and welcome to another episode of the bulls versus the bears. Today we are going to do a little swing trading. In other words we are going to learn swing trading today. Swing trading is one of those trading styles that suits  traderswho want to spread their trading horizons.   Swing trading helps  you do the following: Allow you to hold your trades for two days or more, go out and smell the roses, and trade at a slower pace. In other words, if you are a day trader, and looking for other trading frontiers to conquer, swing trading  could be your next trading front.

I mean let’s look at it this way. It’s tough enough finding the right forex strategy. Right? Then you have to twist your brain dealing with even more complicated issues such”Where Do I Start?” and “How Do I know Whether I’ve found the right strategy?”. This is enough to give anybody a major migraine of a headache. And considering the countless number of trading strategies littering cyberspace like satellites in outer space, you’d have to be Houdini to be able come up with all the answers. Add the long trail of technical indicators,and you’ve got yourself an even messier mess.

But the good news is swing trading will solve all this confusion for you. If you’re the type looking for a trading style that will eliminate all that confusion in your head then swing trading could be what you’re looking for. We’re going to define what swing trading is all about, and then we’ll look at  few ways as how to profit from swing trading.

But first off:

What is Swing Trading?

Well, swing trading is basically looking to profit from swings in the forex market utilizing highs and lows in the uptrend and down trend. You are looking to identify swings in the forex market and make your entry only when there is a high probability of profiting from a trade.  So if  you are in an uptrend, looking at swing lows, you may  want to go long(or buy).  On the flip side, if  the market is in a downtrend, also staring at swing lows, it makes logical sense to got short(or buy) Remember when we deal HH HL, LH, LL in Trade Trends Using Price Action Analysis? That’s basically what swing trading is all about.

There are  a few things you should be able to master as a swing trader. First you should be able to identify the past and current trend on the price chart and ascertain if  the trend is still in one piece or not. And he should be able to establish whether there could be a potential reversal once the said trend is broken or the players run out of steam. Also you should be able to identify the previous upswings and downswings of the price. By the way, these upswings can transform into support and resistance levels where  price can ricochet up and down in the future. Not only that, but you should be able to identify the support and resistance levels. Let’s look at the price action of the EUR/AUD

swing trading for dummies

This,ladies and gentlemen, is the price action of the EUR/AUD between January 2015 and April 16.Notice all the highs and lows swinging all over the place between that time period. The uptrend and downtrend look well-defined. See the way the support level zone is well laied out? The bulls are bouncing of it, and the bulls are launching off it. Seems like a lot of activity going on here.

How Do I Enter Swing Trade?

Well,  you can do it a few  ways. If  you are trading in the uptrend just when the downtrend is running out of steam. Why? So you can rake in your profits in the next upswing session. And when you are trading in the downtrend, How do you enter the swing trade? You guessed it, just when the swing on the uptrend is running out of steam and blowing fumes. And Why? so you can cash in on the next bears excursion as the price takes a dive. Let’s see an illustration of a swing trade in action, using the AUD/USD pair.

Ladies and gentlemen, this is the Aud/USD pair in swing action. Notice the bullish engulfings labelled in blue  at the end of the bearish swing?This is where you enter your trade. You enter your trade just when the bears are fizzling out.  Now look at the white arrow at the beginning of th bearish reversal, led by the bearish harami. That’s about the same time the bulls start to fade. And when that scenario unfolds,you enter your trade.  You should have no problem cashing in on the bears slalom run.

Now just to make life more easier for you, I’m going to give you six tips on how to swing trade. Starting with:

Stick With The Daily Time Frame

You’d be better off if you stick with the daily time frame.   Why?because the daily charts in this time frame paint a much accurate picture as what is happening with the price action and they provide more reliable price signals. Now I know some of you are itching to jump into the 4 hr timeframe.But just like anything in life,one step at a time.Once you master the daily time frame can then move on to the 4 hr time frame and beyond till your heart is content. Price action signals become more reliable as they moe up from lower to higher time frames. If you wanna learn how to choose a time frame to trade in,  Read up on Looking at The Big Picture Using Multiple Time Frame Analysis.

Next Up is :

Draw Key Support and Resistance Levels

You absolutely have to draw key support and resistance levels. I’m sure you are familiar with key support and resistance levels. It’s probably the most important component of the swing trading process. Support and resistance levels are akin to laying a foundation to a house. Without these two tools, it will be difficult to find favorable wing trades. There are two levels of support. The first one is:

Horizontal Support and Resistance

Horizontal support and resistance is the most basic levels on the price charts. At the risk of repeating myself, they lay the groundwork for trading swings in the forex market. And  you can find some of the best trading opportunities in these areas. If you’re looking for ideas on how to draw  horizontal support and resistance, Look up Identify Support and Resistance Levels Using Price Action.

Next up is:

Trend Lines

Please, what ever you do, do not ignore trend lines. If you do, you will creating a huge gap, the size of a Black Hole in your forex trading knowledge. Now some of you are like”Why do I need to know how to draw trend lines?” Because not only do they help you identify trends, but they also help spot reversals before they actually happen. It’s like spotting a hurricane before it makes landfall.

Now I believe we’ve already covered trendlines in my post Drawing and Trading Trend Lines. If you want to learn how to draw and trade trend lines, I strongly suggest you read the above post. You would be the better for it.

Assess Trend Momentum

It’s absolutely crucial that you assess trend momentum when trading swings on the forex market. You will definitely need them when looking for swing opportunities on the charts. You will be looking  at three types of momentum changers when hunting for swing trades.They are:

  • Uptrend:Higher Higher highs and higher lows.
  • Downtrend:Lower highs and lower lows
  • Range:Sideways movement- I suggest you read up on Forex Market Goes Sideways.

We’ll look up graphic illustrations of each of the three momentum changers. Starting with:

Uptrend:Higher  highs and higher lows

Image result for forex higher highs lower lows

You should know by now that whenever the bulls are in an uptrend, they carve out higher highs and higher lows(HL, HH).  You see how  each swing point is higher than the previous one? If you want to be a buyer in this bullish momentum you absolutely have to gobble up these swing opportunities. You’d be committing forex trading malpractice if you pass up on such huge opportunities.

Next up is:

Downtrend:Lower Highs and Lower Lows

Image result for forex lower highs higher lows

When the market is in a downtrend, the bears carve up lower highs and lows. Notice how  the swing points start with lower highs and  then descend down to lower lows. That suggests the bears are depressing the price for all its worth. In such a scenario, that;s your queue to put in your entry  sell trade. Of course you’d have to enter at a lower high-around the same time that the bulls are fizzling out. You’d need your head examined if you pass up on this opportunity.

As I indicated earlier, if you want to brush on  your trend trading,  look up Trade Trends With Price Action Analysis. You can also look up Drawing and Trading Trend Lines.

Last but not least is:

Range:Sideways  Movement

Image result for forex- bullish and bearish pin bars in sideways market

 

This is pretty much self-explanatory.This is where the forex market skids sideways within a range. Basically you have a war of attrition where both buyers sellers are caught in a trap trying to figure out their next move. Bullish and bearish momentum have come to a screeching halt. However, it’s possible swing trade opportunities thanks to the defined support and resistance levels. In

Just take a look a the bearish pin bar breaking through the level of resistance and th bullish pin bar doing like wise at the level of support. In both scenarios, you’d do well to enter your trades. However, make double sure the coast is all clear before you enter your trades. Or else, the choppy waves of the sideways range will eat up your trading position.

For more information on trading  ranges, look up Forex Market Goes Sideways.

Look Out For Price Action Signals

You do not want to ignore price signals in the swing trading process. Think of them as the message alerts of the price action. They let you know whether your trading edge is present on the charts. In case you’ve forgotten your trading edge represent conditions on the forex market that need to be present for you to enter your trade.  A very good place to look for price signals is at key  levels of support and resistance.

For instance if you happen to see the bulls in an uptrend you’d do well  to  find price signals at level of support. Why? Because  bulls in the uptrend  start their mountain climb at the support level. So it would  make sense to look for price signals within that locale. Two great  candlestick patterns  are to look for are   pin bars and engulfing candles.  Let’s take a look at graphic examples of these two patterns. Starting with

Pin Bars

Image result for forex - bullish pin bar at key support

This is an example of a bullish pin bar at key levels of support.  Notice the higher low pin  bar labelled with a green arrow at the level of support? That’s what you call the higher low. As you may have noticed the pin bar has a long tail and a slim body. So when you see this pin baring its majesty, that’s a signal for you to get ready to enter. Wait for confirmation from the next candlestick before you enter. The whole idea is to use the pin bar signal to make a trade. As you can see, the bulls are swing upward.With this scenario, you should make  handsome profit.

On the flip side, if the bears take over the market, you want to look out for sell signals along the key level of resistance. Take a close look at the bearish pin bar labeled with a green arrow at  the key level of resistance. That’s the lower high . or swing high.And That should alert you to get ready to enter.However wait for confirmation from the next candlestick just in front of the smallish pin bar before you make your entry trade. Jump in too soon, and you’ll get your fingers burnt.

Please don’t go looking for setups. Let them find you instead. You do not want to sit in front of your screen all day hunting for setups.If you find some, that day is your lucky day. If, not you live to trade another day. Trying to force trades that don’t exist is a recipe for disaster.

For more information on looking for price signals look up Price Signals: Weeding the Chaff  from the Good.  And for more info on pin bars and the engulfing candle look up the Pin Bar Strategy and Dual Candlestick Patterns.

Next Up is:

Plan Your Exits

When I say plan your exit you need to identify your exits. You don’t want to get too greedy out there. So when you make your profit, listen to that still small voice telling you “Get outta here!” Now there are two rules you need to adhere to when it comes to identifying your exit points. First, you need to have a defined profit target and a stop loss level. Please do not follow the crowd by only setting your profit target and dumping your stop loss in the trash. GREED DOESNT PAY!.

The second rule  is you need to follow both these rules before you even fantasize about risking your money. It’s very important that you  be very objective about this. Why? because if your emotions get in the way of  following these two rules, your account may end up being a black hole. You end up placing your profit targets at levels that benefit your trade instead of listening to what the market is trying to get across to you. In other words,your emotions override your logic.

So How Do I Identify My Exit Points?

Easy! Use the support and resistance levels like we discussed earlier. Remember the pin bar illustration we used earlier?That’d be a agreat pattern to use  to identify your exit points. If you need a  refresher. Go over it again. Let me show you a  fairly easy way of determining a swing profit using the pin bar illustration we discussed earlier.

Image result for forex - bullish pin bar at key support

Now let’s take a look at the very first resistance level.   You can place your take profit just above the resistance barrier. The whole idea of the pin bar strategy is to catch the majority of the swing surge. You do not need to catch the entire swing to make your profit. Just get confirmation from the second candlestick and then catch the bullish wave.

You use the same rationale  with the  bearish pin at the support level, You place your profit target in and around the support barrier.

Apply Risk Management

Now that you’ve identified your profit target and stop-loss, it’s time to apply some risk management.  What you’ll be doing is calculating your risk and identifying your profit target and stop loss.  You absolutely have to if you want your sanity in one piece.  Let’s get started with

Calculating Your Risk

.When calculating your risk, you’ll be doing two things – setting your stop loss and profit target. You absolutely have to do this if you value your sanity. Anyways, about the stop loss: If you are using the pin bar, the best place the pin bar is above or below the tail. Let’s look an illustration below.

Image result for placing stop loss above or below the tail

If you are using the bullish pin bar(on the left) setup just place your stop-loss below the tail as indicated  by the arrow. However, if you want to play with the bears(on the right) place your stop loss above the tail of the pin bar. This way your trades don’t take a major hit.

The same strategy applies when trading the bullish and bearish engulfed patterns. Let’s watch an illustration

Image result for stop loss in bullish and bearish engulfing pattern

With the bullish pattern, you place your stop-loss just below the bullish candles tail while. But if you’re playing with the bears stick your stop loss above the tail.  When trading  both bullish and bearish engulfing patterns,make sure the your stop loss is about 10 to 20 pips below and above respectively, the candlesticks being traded. Straight forward. Isnt it?

Now that we’ve figured out how to place your stop-loss:

How Do I Determine Profit Target?

Well the most logical place to place your profit target is between support and resistance levels.That’s where the swing trading action is at. Remember that  your main objective as a swing trader is to catch the swing trading opportunities between the support and resistance levels. So when you catch a bullish  pin bar forming at the level of support, start looking out for the key of resistance. Your conclusion should help you determine where to place your next profit target. If there is no pin bar showing , just sit on the bench and wait for the next trading opportunity.  Let’s see how to place the profit target at both support and resistance.

Image result for forex - how set up profit target with bullish pin bar

As you can see, the profit target at the support level is set above the tail. While the profit target at the resistance level is set below the tail. If you see these two setups. you set your profit targets. Simple as ABC.So if you want to learn risk management look up  Practice Risk Management or Die as a Forex Trader.

 

That’s  a wrap for ”Do Some Swing Trading .”    As you can see swing trading can be very beneficial. But  you need to ask yourself the following questions

  • Do you I want to hold my trades for more than two days?
  • Do you want freedom to smell the roses?
  • Do you want a slower pace to your trading?

If you answer yes to all the questions, then swing trading is for you.

Til next time take care.

Looking To Join The Forex Trade Gravy Train?

If you’ve stumbled in here looking to join the forex trade bandwagon, here is what you need to do . First,  look up  Why Forex Trade Is So Popular.  Next, you learn  the fundamentals of forex trading by reading  Forex Trading Basics – Top To Bottom Part I  and Forex Trading Basics – Top to Bottom Part II .Next, you need to learn how to read candlestick patterns. They are the main feature of price action analysis. And you need to know what these patterns are telling you. To be able to do that read the following on Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns,  Dual Candlestick Patterns, and Triple Candlestick Patterns .    Also You Need To Know Ten Of These Candlestick Patterns . And finally If you want to give your trading skills an edge by relying on pure price action trading/analysis,  instead of fancy forex robots and fancy indicators, get started with What is Price Action Trading? 

Looking to get a leg up on price action analysis,?you need to learn How to Identify Support and Resistance Levels.  And if you want to learn how to interpret trading zones, read up on Identifying Dynamic Support and Resistance Levels. Finally you should know  How To Read Candlestick Patterns using Support and Resistance Levels.

However, if you only want to trade once a month and watch your entry rack up huge profits over a stretch  of several weeks, consult  How to Spot High Probability Trades.  And if you  are  still not sure about  price action trading, find out   Why Price Action Trading Still Rocks . Dont let me stop you from reading the other posts as well. But the  suggested posts above are the most important posts to get  you started.

Wanna Subscribe to My Mailing List?

Do you want me to send you the latest posts to your email address inbox?Then  subscribe to my mailing list and I’ll send my blog posts direct to your inbox. It wont cost you a penny.

P.S. if you want to know everything there is to bene know about price action trading   Download for free The Ultimate Guide To Price Action Trading by Rayner Teo. This brilliant ebook will change . It sure did mine.

And if you are looking for   a place  to put your price action trading strategies into practice(Including setting your level and margin), and get a simulated feel of  live forex trading conditions   before  trading live, open a free demo trading account with Easymarkets.  But  if you believe you are ready to trade live on the forex markets, open a forex trading account with EasyMarkets and get a free forex trading e-book.

 

How To Create Your Own Forex Trading System

Hello and welcome to another episode of the bulls versus the bears. Today we are going to learn how to create our own forex trading system. No, we are not going to create a prototype space rocket. We are just going to create a set of rules  that will act as a guide for you as you trade.  In this vast space called life,you need a set of rules to guide you in everything that you do right? It’s no different with forex trading. You need a set of rules  for make trading decisions. This way when you trade, you are trading based on sound logic and not scattered emotions.

Your trading system is also designed to help you wait for solid confirmation of trade and exit signals. Thanks to your trading system, you can quickly locate good entry points, profit-maximizing points, and avoid fake entries and exits. Even more important, you must follow your trading system to the letter.Straying from this system could be very detrimental to your trading prospects.

So what are we are going to do? We are going to go through five steps for creating your prototype forex trading system. The first step is:

Decide Which Time Frame You Are Comfortable With

You need to decide which time frame you are comfortable trading with. The last thing you want to do is to pick a time frame which goes against your trading personality. If you are the type who like to trade quick and fast, then the M1, M15, M30 time frames are just what the doctor ordered. However,  you may be forced to stare at the screen like a security guard  all day looking fo those quick trades. Even worse, getting solid trade signals are very rare on these time frames. And it may cause you  too much stress.

However, if you don’t mind waiting a day or two or even longer, the H1 H4, daily , monthly, or   then longer time frames would fit you just fine. The H1 is more popular among most traders  for it flexibility. You can trade any type of trading system within this time block. What you need to understand is that there is no specific rule etched in stone as to the best time frame to trade in. It all boils down to  what your trading personality is,and how much time you can commit to trading. And please don’t follow the crowd when choosing a time frame to trade in. You will pay dearly for it. You choose a time frame that  suits your trading personality and aligns with your trading system.

If you ‘re trying to figure out which time frame to choose, look up Looking At The Big Picture Using Multiple Time Frame Analysis.

Even more important, you choose the currency pairs you are comfortable with and what hours they trade. If you are  the type who does not like staring at the screen all day you just set the trade, leave the house and let the market do its work.

Next up:

Decide Which Trading Tools To Trade With

You need to decide which tools you are going to trade with. These tools should be trader-friendly such that you should be able to identify trading opportunities at the speed of light. Not only should you choose trading tools that you are comfortable with, but you should be proficient using these tools.For our purposes, since we are using raw price data, the most obvious tools to use would be price action and candlestick patterns.  And as you well know,we just finished a series on interpreting candlestick patterns.If you missed those posts, I suggest you go back to them pronto: Just to remind you, we covered Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns, Dual Candlestick Patterns, and Triple Candlestick Patterns. So if you missed any or all of these posts ,acquaint yourself with these posts as soon as possible.

Another effective tool you could also use is Moving Averages. Just to remind you, moving averages help ascertain the potential  direction of trends. And  most of you are aware that we did a two part series on moving averages.So if you want to refresh yourselves on Moving Averages, check out Moving Averages parts I and II.  And for your information, you can use all of these tools if you so choose.You don’t need to get hung up on just one tool. Who does that anyways?

Anyways Next Up:

Decide How Much You Can Afford To Lose?

As some of you know by now .not all forex  trades end as profits. So you need to decide quickly how much money you can afford to lose on a given trade without shedding tears over it. In so doing it helps you stay within your risk limit. Even more important, it keeps your emotions in check,especially when you are tempted to jump back into the market after losing out on a trade. This is where risk management and position sizing comes in real handy.

Speaking of which? have you read my recent post on Risk Management? If you havent, do so as soon as possible if you do not want to risk your whole account go up in smoke.

Make Up Your Mind When To Enter And When To Exit

You have to make up your mind when to enter and when to exit. In other words, decide when to enter and when to exit each trade. The price action on the price chart usually does a good job of alerting you of a good entry point. The logical solution will be to wait until the candle signalling the trade has closed.

If   you want to adopt a cavalier approach, you can make your entry before the candle closes. However, you could  be committing suicide as the market could easily do a 360 on you and swallow your trading position like a whale swallows seaweed. And as  I’ve said before the forex market has a mind of it own. It’s very unforgiving towards adventurous traders who think they’re smart. So don’t make outsmarting the forex market part of your trading system. For more information about how to enter and exit trades, read up on Find, Enter, and Manage Forex Trades.

Last But Not Least:

Test Your Trading System

You’d be crazy  implementing your trading system without testing it first. It’s a no brainer. It’ll be like buying a shotgun without testing first. You have two options.  You can back test  your trading system through a strategy testy.Or you can use the manual route by recording possible trade entries and exits.Considering that we’re working with  raw price data, I suggest the latter. Why?You want to get a natural feel for how your trade entries are working. Not to mention the fact that you also want to get a close understanding of the workings of your trading system. Which is exactly what you are aiming for right?

If you are satisfied with the test results you then try your trading system on a demo account to  get a feel for the trading system.You also  want to get a virtual feel of how to  try out your trading system  as you are trading in a  live environment

By now you should be close to getting satisfied about the results from testing your forex trading system right? Well if you are satisfied, clap for yourself. Because  you are  nowready to graduate to trading  with a real account. But if you still have any lingering doubts, put your decision to trade on hold. Keep tweaking your trading system and retest it until you are satisfied with the results.

 

That’s  a wrap for ”How To Create Your Own Forex Trading System .”    Creating your own forex trading system is not rocket science. You are just creating a set rules out of the trading concepts that you’ve been studying. So long as you follow all the rules of your forex trading system, you will experience forex prosperity for the rest of your natural life. If you decide to ignore your trading system and trade on a crazy whim, you’re asking for trouble.

Til next time take care.

Do You Want To Join The Forex Trading Gravy Train?

If you’ve stumbled in here looking to join the forex trade bandwagon, here is what you need to do . First,  look up Why Forex Trade Is So Popular.  Next, you learn  the fundamentals of forex trading by reading  Forex Trading Basics – Top To Bottom Part I  and Forex Trading Basics – Top to Bottom Part II .Next, you need to learn how to read candlestick patterns. They are the main feature of price action analysis And you need to know what these patterns are telling you. To be able to do that read the following on Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns,  Dual Candlestick Patterns, and Triple Candlestick Patterns .    Also You Need To Know Ten Of These Candlestick Patterns . And finally If you want to give your trading skills an edge by relying on pure price action trading/analysis,  instead of fancy forex robots and fancy indicators, get started with What is Price Action Trading? 

Looking to get a leg up on price action analysis,?you need to learn How to Identify Support and Resistance Levels.  And if you want to learn how to interpret trading zones, read up on Identifying Dynamic Support and Resistance Levels. Finally you should know  How To Read Candlestick Patterns using Support and Resistance Levels.

However, if you only want to trade once a month and watch your entry rack up huge profits over a stretch  of several weeks, consult  How to Spot High Probability Trades.  And if you  are  still not sure about  price action trading, find out   Why Price Action Trading Still Rocks . Dont let me stop you from reading the other posts as well. But the  suggested posts above are the most important posts to get  you started.

Wanna Subscribe To My Mailing List?

Do you want me to send you the latest posts to your email address inbox?Then  subscribe to my mailing list and I’ll send my blog posts direct to your inbox. It wont cost you a penny.

 

P.S. if you want to know everything there is to know about price action trading   Download for free The Ultimate Guide To Price Action Trading by Rayner Teo. This brilliant ebook will change . It sure did mine.

And if you are looking for   a place  to put your price action trading strategies into practice(Including setting your level and margin), and get a simulated feel of  live forex trading conditions   before  trading live, open a free demo trading account with Easymarkets.  But  if you believe you are ready to trade live on the forex markets, open a forex trading account with EasyMarkets and get a free forex trading e-book.

 

 

The Double Edged Sword Called Leverage and Margin

Hello and welcome to another episode of the bulls vs the bears. This week, we are going to tackle the double-edged sword called Leverage and Margin. I call it a double edged sword because it can make or break you if you don’t handle them properly. Not only is it a deadly double edged sword, but it is also another elephant in the room that  rookie traders don’t want to talk about.  They are in so much of a hurry to gamble their money away and they fail to understand the grave impact that their kamikaze me might have on their trading accounts.

So  guess what we’re going to do? We are going to find out what leverage and margin are. And then we are going to learn certain things we absolutely have to avoid doing when using leverage and margin. But first:

What is Leverage?

Basically leverage is the power to control a humongous amount of money with very little of your capital and borrowing the rest. Say you control a $100,000  trading position using the GBP/USD currency pair. And by the way, the money was borrowed from the broker, not a bank. Your broker then sets aside $1000 from your trading account. Since leverages are expressed in ratios, your leverage will be expressed as 100:1. Meaning you are controlling $100,000 with $1000.  Let’s assume out of nowhere, your $100, 000 investment climbs up to $101,000 on that same  $1000 account. Since your broker only has to set aside only $1000, you’d have gained cool 100%. Meaning you’d have gained $1000 on your initial $1000 investment. Let’s take a look at a leverage graph.

leverage

Now here is a nice little graph various leverages and their corresponding investments. Like I said, leverage  can work for you and work against you. You just need to curtail your greed when deciding which leverage ratio you want to work with.

Now let’s assume $1000 on that same $100,000 investment. You’d have ended up with a humongous -100% loss on  100:1 ratio. Now you see why I say leverage is a double-edged sword? Next up is:

What is a Margin?

Well, basically a margin is the amount of money needed to open a trading position. It is usually used by your broker to maintain your trading position. How does your broker do this? Well your broker takes all other traders’ deposits, pulls these deposits with those everyone else, and then uses this huge deposit to be able to place trades. Margin is also viewed as a percentage of the full  amount of the trading position. For instance you hear a lot of brokers say they require 2% 1 % or .5 margin.

Based on the margin required by the broker you calculate the maximum leverage you can mater with your trading account. So if your broker requires a 2% margin,you have a leverage of 50:1.  Going back to earlier example,the $1000 deposit is now your margin you need in other to get your leverage. Below is an illustration of tempting leverages that some brokers offer:

MARGIN REQUIRED MAXIMUM LEVERAGE
5.00% 20:1
3.00% 33:1
2.00% 50:1
1.00% 100:1
0.50% 200:1
0.25% 400:1

These leverages look very tempting. But  like I’ve said, it can be a double-edged sword and detriment to your trading account. So watch out. But there are a few margin calls you need  to know. First off:

Margin Required – Money broker requires from you to open a trading position.

Account Margin –Total amount you have left in your trading account

Used Margin – The amount of money that your broker has locked up to keep your trading positions open. Basically your broker is telling you”your money is still yours. But we can’t let you touch it, untill you close your current positions or you receive a margin call. Speaking of which:

Margin Call

Margin call is where the amount of money in your account is unable to cover an impending loss.This happens when your equity falls below your used margin. In such a scenario, your broker will close all open positions at the market price. Let me explain the margin call a little bit.  You open a $10,0000 account. Upon login in to your account you see the $10000 nicely published in the “Equity column” of your “Account Information” window. See it below.

Usable Margin = Equity - Used Margin

As you can also see,your used margin for now  is indicated  and your usable margin(Cash available) is $10000.While balance and equity is the same amount.  If you want to find out what your usable margin is  the formula is simple: Usable Margin= Equity – Used Margin.

Get one thing straight. It’s your equity,   that used to determine the usable margin. It’s definitely not your balance. The size of your equity will also determine when the margin call alarm goes off. So long as your equity is greater than your used margin,you wont get that margin call from your broker. And when you do get that margin call,you’d be better off going back to your demo account and re-learn all your price action strategies. Jumping back into the market will cause you a major nervous breakdown.

 

That’s  a wrap for ”The Double Edged Sword Called Leverage and Margin .”  Leverage and margin look enticing.But they can suck you dry if you get too greedy. So when ou calculating your leverageand margin, make sure you don’t cut your nose to cut your face.

Til next time take care.

 

Do You Want To Join The Forex Trading Gravy Train?

If you’ve stumbled in here looking to join the forex trade bandwagon, here is what you need to do . First,  look up Why Forex Trade Is So Popular.  Next, you learn  the fundamentals of forex trading by reading  Forex Trading Basics – Top To Bottom Part I  and Forex Trading Basics – Top to Bottom Part II .Next, you need to learn how to read candlestick patterns. They are the main feature of price action analysis And you need to know what these patterns are telling you. To be able to do that read the following on Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns,  Dual Candlestick Patterns, and Triple Candlestick Patterns .    Also You Need To Know Ten Of These Candlestick Patterns . And finally If you want to give your trading skills an edge by relying on pure price action trading/analysis,  instead of fancy forex robots and fancy indicators, get started with What is Price Action Trading? 

Looking to get a leg up on price action analysis,?you need to learn How to Identify Support and Resistance Levels.  And if you want to learn how to interpret trading zones, read up on Identifying Dynamic Support and Resistance Levels. Finally you should know  How To Read Candlestick Patterns using Support and Resistance Levels.

However, if you only want to trade once a month and watch your entry rack up huge profits over a stretch  of several weeks, consult  How to Spot High Probability Trades.  And if you  are  still not sure about  price action trading, find out   Why Price Action Trading Still Rocks . Dont let me stop you from reading the other posts as well. But the  suggested posts above are the most important posts to get  you started.

Wanna Subscribe To My Mailing List?

Do you want me to send you the latest posts to your email address inbox?Then  subscribe to my mailing list and I’ll send my blog posts direct to your inbox. It wont cost you a penny.

P.S. if you want to know everything there is to know about price action trading   Download for free The Ultimate Guide To Price Action Trading by Rayner Teo. This brilliant ebook will change your life as a trader. It sure did mine.

And if you are looking for   a place  to put your price action trading strategies into practice(Including setting your level and margin), and get a simulated feel of  live forex trading conditions   before  trading live, open a free demo trading account with Easymarkets.  But  if you believe you are ready to trade live on the forex markets, open a forex trading account with EasyMarkets and get a free forex trading e-book.

 

 

Practice Risk Management Or You Die As A Forex Trader

Hello and  welcome to another episode of the bulls vs the bears.  Yes, you do need to  practice managegement or you will die as a forex trader.. No, you wont die a physical death, but you will die a financial death through taking reckless risks on your trading position and your trading account. If you’ve gotten the hint by you you’d know that  we are going to be touching on risk management Now what is risk management? risk management is managing your losses so you don’tbow your entire account into smithereeens.Risk management is absolutely crucial for your trading account for it teaches you discipline and patience as far as deciding how much money you can afford to let go without getting a hernia in case the trade goes south.

Unfortunately risk management has become this elephant in the room that nobody wants to talk about. Why? because a lot of traders just   jump into the forex market with total disregard for the size of their trading account . They just decide how much of a humongous loss theiremotional    shock absorbers can handle and then hit the “trade” button. Of course,their money ends up in a Black Hole, and then they blame  forex market for it.  Newsflash! You played yourself on this one. You need to follow risk management rules that will help you make profits. If not, you’ll end up gambling your entire account away.

So here are a few risk  management rules you need to follow. First,

Never Risk More Than 2% of Your Trade

The rule of thumb in the forex trade is that you never risk more than 2%of your trade. Let’s take a look at an illustration of a table comparing a 2% risk to a 10% risk.

TRADE # TOTAL ACCOUNT 2% RISK ON EACH TRADE TRADE # TOTAL ACCOUNT 10% RISK ON EACH TRADE
1 $20,000 $400 1 $20,000 $2,000
2 $19,600 $392 2 $18,000 $1,800
3 $19,208 $384 3 $16,200 $1,620
4 $18,824 $376 4 $14,580 $1,458
5 $18,447 $369 5 $13,122 $1,312
6 $18,078 $362 6 $11,810 $1,181
7 $17,717 $354 7 $10,629 $1,063
8 $17,363 $347 8 $9,566 $957
9 $17,015 $340 9 $8,609 $861
10 $16,675 $333 10 $7,748 $775
11 $16,341 $327 11 $6,974 $697
12 $16,015 $320 12 $6,276 $628
13 $15,694 $314 13 $5,649 $565
14 $15,380 $308 14 $5,084 $508
15 $15,073 $301 15 $4,575 $458
16 $14,771 $295 16 $4,118 $412
17 $14,476 $290 17 $3,706 $371
18 $14,186 $284 18 $3,335 $334
19 $13,903 $278 19 $3,002 $300

See the difference between risking 2% of your account compared to risking 10% of your account on a single trade? Let’s say you lost 19 trades in a row,  on 10% risk, you’d have lost as much as 85% of your trading account, leaving you with a paltry $3002. Whew!That would definitely have cost me a  few sleepless nights, not to mention major migraine headaches. On the other hand if you had risk the 2% like we suggested, you’d have lost only 30% of your account.- leaving you a healthy $13,903. Now although that’s money lost, it’s a whole lot better than losing a whopping 85% of your account.  And you will have enough money to trade with.Also, you don’t dwell too much on this loss.You move on and learn from this loss because you  can afford to sleep at night without having recurring nightmares, unlike the 85% bust.

What’s the point of this illustration? you need to set up risk management rules such that you still have enough money to trade on the market. Now assuming that you blew up 85%  of your trading account, you’d have to make up an insane 566% of the balance in your account in order to break even. Now why would I want to put myself through this stress?This is why I stress the importance  of not risking not more than 2% of your trading account. Now I guess the next question some of you want to ask is:

How Do I Get Back to Break Even Point?

This table ought to show you how to get back to break even point.

LOSS OF CAPITAL % REQUIRED TO GET BACK TO BREAKEVEN
10% 11%
20% 25%
30% 43%
40% 67%
50% 100%
60% 150%
70% 233%
80% 400%
90% 900%

As you can see, when you lose money, You end up having to make up for lost cash. And nine times out of 10, it’s an uphill struggle. It’s also the more reason why you do everything in your power to protect your trading account like a lioness protecting her cubs. Because you lose your money to the Black Hole, it is near impossible to make it all back.  By risking a smaller percentage of your account you give yourself the opportunity to  get over your losing streaks and avoid a total meltdown of your trading account. The moral of the story is  be calculating with your risk taking or you’ll end your money away.

Set A Risk/Reward Ratio

Another method of  managing your trade risk is to set a risk /reward ratio. Now a  risk/ reward ratio is basically the amount of money expect to gain on a trading position relative to what you are risking in the event that you incur a loss on your trading position. One thing you need to understand is that the risk-reward ratio is not a set formula. You need to find a positive ratio for your risk strategy. This way you increase your profit margin when you hit the jackpot as compared to losing your money when you strike out.

Some of you are probably wondering”Why do I need to set a risk-reward ratio anyways?” Well,the simple truth is you do  not want your losses exceeding your profits. A  lot of traders risk too much of their cash on losing positions han they do on winning positions.  In so doing, they end up using negative risk/ratio, which requires a higher winning percentage to make up for your losses. You do not want to be in this situation. Just create a workable winning risk/reward ratio that you can live with. Most experts say a 1:2 ratio is the minimum formula for maintain healthy profits. In other words, you only need to have one winning  trade for any two given losses to net to break even. This way,you maximize on winning profits while avoiding potential tsunami-size losses should the trade do a 360 on you.

Let’s look at the EUR/BP pair in action

Risk_Reward_Ratios_for_Forex_body_Picture_2.png, Risk Reward Ratios for Forex

This is a sample range on   the 4 hour time frame  for the EUR/BP pair. As you can see traders are looking to make their entry at the resistance barrier around the .8575 level. When setting your stops,make sure you set them just outside the support or resistance level. So in this instance you set it at the resistance level. So that in the event price breaks through range, you lose no more than 50 pips. However, you can make at least  twice as much in profit by placing a limit order near the level of support at .8475. In so doing you create the  1:2 ratio that I was talking about earlier.  Like I said earlier, it depends on the conditions at the time Some go for 3:1, others go as high as 4:1. You just need to use prosper discretion when setting your ratios.

If you want to know more about setting stops, limit orders and other kinds of market orders look up Forex Basics – Top to Bottom Part II

 

That’s  a wrap for ”Practice Risk Management or Die As A Forex Trader .”   I hope you ‘ve understood the importance of risking what you can afford to trade. You need to manage your risks for the health of your account and for your own sanity. The last thing you want is to play catch up just to make up for the Black Hole you’ve created for yourself.

Til next time take care.

Do You Want To Join The Forex Trading Gravy Train?

If you’ve stumbled in here looking to join the forex trade bandwagon, here is what you need to do . First,  look up Why Forex Trade Is So Popular.  Next, you learn  the fundamentals of forex trading by reading  Forex Trading Basics – Top To Bottom Part I  and Forex Trading Basics – Top to Bottom Part II .Next, you need to learn how to read candlestick patterns. They are the main feature of price action analysis And you need to know what these patterns are telling you. To be able to do that read the following on Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns,  Dual Candlestick Patterns, and Triple Candlestick Patterns .    Also You Need To Know Ten Of These Candlestick Patterns . And finally If you want to give your trading skills an edge by relying on pure price action trading/analysis,  instead of fancy forex robots and fancy indicators, get started with What is Price Action Trading? 

Looking to get a leg up on price action analysis,?you need to learn How to Identify Support and Resistance Levels.  And if you want to learn how to interpret trading zones, read up on Identifying Dynamic Support and Resistance Levels. Finally you should know  How To Read Candlestick Patterns using Support and Resistance Levels.

However, if you only want to trade once a month and watch your entry rack up huge profits over a stretch  of several weeks, consult  How to Spot High Probability Trades.  And if you  are  still not sure about  price action trading, find out   Why Price Action Trading Still Rocks . Dont let me stop you from reading the other posts as well. But the  suggested posts above are the most important posts to get  you started.

Wanna Subscribe To My Mailing List?

Do you want me to send you the latest posts to your email address inbox?Then  subscribe to my mailing list and I’ll send my blog posts direct to your inbox. It wont cost you a penny.

 

 

 

 

P.S. if you want to know everything there is to know about price action trading   Download for free The Ultimate Guide To Price Action Trading by Rayner Teo. This brilliant ebook will change your life as a trader. It sure did mine.

And if you are looking for   a place  to put your price action trading strategies into practice(Including How To Read Triple Candlestick Patterns), and get a simulated feel of  live forex trading conditions   before  trading live, open a free demo trading account with Easymarkets.  But  if you believe you are ready to trade live on the forex markets, open a forex trading account with EasyMarkets and get a free forex trading e-book.

 

 

How To Get a Read on all Candlestick Patterns using Support and Resistance Levels

Hello and welcome to another episode of the bulls and  the bears. This week we’ll look at using all the candlestick patterns that we’ve studied this past few weeks to  interpret support and resistance levels.In plain English, we’ll find out how  a read on all the candlestick patterns  we’ve studied so far using support and resistance. Some of you may have some inkling about support and resistance  reading my post Identify Support and Resistance Levels with Price Action Analysis.  If you haven’t I suggest you do it real quick before reading this post. Or else you will be totally lost in the wilderness here.

But  before I go on, a little reminder. If you havent read my previous candlestick posts do so as soon as possible. Because if you try to make sense out of this post without reading the others, you may end up pulling your hair in utter frustration. Just so you know, we started by  learning Fundamentals of Learning Candlestick Patterns.  Then we touched Then we touched on How To Read Single Patterns To Identify Potential Market Moves . We then moved on to Dual Candlestick Patterns, and finally we ended on Triple Candlestick Patterns.  So there you have  it.

Now to today’s lesson

Applying Candlestick Patterns With Support and Resistance

Some say the  easiest way to interpret  candlestick patterns is by applying  them with support and resistance levels.  Some of you may be wondering”Now why is that the case?” because support and resistance levels reflects psychological areas where the bulls(sellers) and the bears(sellers) have set up their stalls.  Also, trading candlesticks in isolation can be detrimental to the health of your trading positions, not to mention your trading account. You need to know the market environment and what price is trying to get across to you.

Also , Getting to know  how   candlesticks react to these psychological areas will help you establish which direction the price will head to next. To help clear the confusion, let’s  look at a live price action situatio using the  three inside down pattern..

 

As you can see the  resistance  barrier has set up  stall at the 1.49 level. You’re probably like  like “Hmmm…. Looks like the breakout   is on here. I better jump in” Not so fast buddy! See the  bullish candle massaging the resistance barrier? You’d be better of waiting first for further confirmation. Jump in right  now,and you’ll suffer a massive  nuclear hit on your trading position and your trading account. Now let’s see how your patience is rewarded.

Three inside down formation forms. Time to sell!

It’s a good thing you waited,. Because two candlesticks later, here comes a nice Three Inside Down formation knocking on the door. Now  if you’ve been paying attention you’d know that a three inside out formation is a  bearish reversal. It suggests the bears are taken over because the bulls have run out of steam. Since you smell blood, you decide to go short on the currency pair. This means you want to enter a trade to sell the pair.  Now you know the    breakout  is really on here. And since you prefer to be safe than sorry you put a  nice stop loss above the resistance pair as indicated by the red line.

By  holding out for the Three Inside Down formation,you increased the odds of a making a nice profit. And your patience was also greatly helped by your knowledge  you acquired from studying candlestick formations. Let’s see how your decision to sell panned out.

Now you see why it pays to be patient? By holding out for the Three Inside Down Formation the pair has immediately netted you  a humongous profit. Time to buy that SUV you’ve been fantasizing about.. Even though you’ve made  a huge profit,you still have this lingering  question at the back of your head going like “Why do I have to trade candlestick patters with support and resistance levels when I could get more signals and make more money with candlesticks alone. Well another look at this chart using only chart formations might catch you to rethink that option

See all the various candlestick patterns shaded in pink and blue? If you had traded based solely on these formations, your trading positions and your trading account would have suffered a nuclear hit so massive that  it would have probably plunged you into a major depression  . So  now you know it pays to pair up candlestick formations with support and resistance? You will be doing your forex account a whole world of good if you don’t jump straight into the fray. Just wait for confirmation from the bears or bulls depending on the direction of the  trend.

Just so you know, this illustration does not apply  to the three inside down formation alone. You can apply this illustration using the various formations in all the candlestick patterns that we’ve studied so far-be it bullish or bearish reversals. All you have to do is to wait for confirmation signals that these patterns have broken through the resistance and support barriers, and then you make you make your move. Anything less will be a monumental disaster.

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That’s  a wrap for ”How To Get A Read on All Candlestick Patterns Using Support and Resistance Levels  .”   It also  means we have come to the end of our candlestick pattern series. Hopefully you’ve gained a full understanding of how to read candlestick patterns on the price charts.

Til next time take care.

Do You Want To Join The Forex Trading Gravy Train?

If you’ve stumbled in here looking to join the forex trade bandwagon, here is what you need to do . First,  look up Why Forex Trade Is So Popular.  Next, you learn  the fundamentals of forex trading by reading  Forex Trading Basics – Top To Bottom Part I  and Forex Trading Basics – Top to Bottom Part II .Next, you need to learn how to read candlestick patterns. They are the main feature of price action analysis And you need to know what these patterns are telling you. To be able to do that read the following on Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns,  Dual Candlestick Patterns, and Triple Candlestick Patterns .    Also You Need To Know Ten Of These Candlestick Patterns . And finally If you want to give your trading skills an edge by relying on pure price action trading/analysis,  instead of fancy forex robots and fancy indicators, get started with What is Price Action Trading? 

Looking to get a leg up on price action analysis,?you need to learn How to Identify Support and Resistance Levels.  And if you want to learn how to interpret trading zones, read up on Identifying Dynamic Support and Resistance Levels. Finally you should know  How To Read Candlestick Patterns using Support and Resistance Levels.

However, if you only want to trade once a month and watch your entry rack up huge profits over a stretch  of several weeks, consult  How to Spot High Probability Trades.  And if you  are  still not sure about  price action trading, find out   Why Price Action Trading Still Rocks . Dont let me stop you from reading the other posts as well. But the  suggested posts above are the most important posts to get  you started.

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P.S. if you want to know everything there is to know about price action trading   Download for free The Ultimate Guide To Price Action Trading by Rayner Teo. This brilliant ebook will change your life as a trader. It sure did mine.

And if you are looking for   a place  to put your price action trading strategies into practice(Including How To Read Triple Candlestick Patterns), and get a simulated feel of  live forex trading conditions   before  trading live, open a free demo trading account with Easymarkets.  But  if you believe you are ready to trade live on the forex markets, open a forex trading account with EasyMarkets and get a free forex trading ebook.