Wide Stop Losses -Absolutely Crucial For High Probability Trade Success

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Hello and welcome to another episode  of the bulls versus the bears. Last time we learnt How To Place Stop losses The Right Way. This week we are going to learn how to place  wide stop losses. According to some people wide stop losses are absolutely crucial  for long trade or high probability trade  success. So if you’re allergic to tight stop losses on day trades, then wide stop losses on long trades could be it for you.

Stop loss placement has been the cause of considerable hair pulling for a lot of trades. They just don’t know how to utilize it. You see, you don’t just put your favorite trading strategy out there and hope for the best. Where you place your stop loss is just as important as where you place your trades on the price charts. The sad aspect of this confusion is that many traders resort to setting tight air sucking stop losses on their trades.  This is the result of lack of understanding on the whole stop loss process. And obviously their limited understanding of   trading issues such as position sizing and  risk reward ratios, proper stop loss placement and , you guessed it, wide stops.

So  here is what we are going to do. we are going to clear up all this confusion around placing stop losses.  I’m going to make a case for why Wide stops are beneficial for your forex trading success. Hopefully you would have learnt how to correctly place stop losses and not pull your hair in frustration this time around(if you have any hair left at all). Even more importantly, you would have understood how to leave your emotions out of the stop loss placement process and not place the stops too tight that your stops end up getting obliterated by the market.

I guess the main  question is

Why Should I Place Wider Stops?

Very simple. Give the market room to breathe.You should know by now that the forex market pretty much has a mind of its own. It can turn on you without a moment’s notice. Knowing this, you should factor this revelation in your decision making as far as deciding where you want to place your stop losses. You just can’t place your stop loss anywhere and hope for the best. You’re just wishing for stars here and that is not good trading strategy. That is a recipe for disaster.

You need to give the market room to go through its routine everyday.  How do you do that? Pull up a tool on your meta 4 platform called Average True Range(ATR) for short).The ATR gives you a daily blow by blow update on the daily range movement over a period of time. The ATR basically measures the distance between previous highs and lows  within a specific time frame. You  get a graphic showing the forex market’s current state of volatility.  This crucial information should help you decide where to place your wide stops.

To activate the ATR on   the MT4 platform  go to <Insert> and then select Average True Range. Upon selecting the the Average True Range, default setting of 14 days will be attached to your chart. You are free to adjust the number of days if you so choose.

How do you adjust the number of days? Drag the cursor to the bottom of your price chart and then  select<ATR(14) properties. This brings up a popup windo as shown below.

Parameters-of-ATR-in-Forex-Trading.

Then under <Parameters> tab you should see a field named “Tab” Just changed the”14″ setting to your preferred setting. The new settings will be applied automatically . If you want to know how to use the Metatrader platform check out Metatrader 4 Part 1 and Metatrader Part II

Now let’s take  a look at another  EUR/USD graphic with the ATR in action

Image result for eurusd showing atr of above 100 and near 100

As you can see the graphic below the price action shows the ATR reading of  the market’s daily range . The daily reading here is 150 pips.Make sure your wide stop is near or bigger than the ATR reading, Anything less could cause a nuclear-sized  hole in your trading account.  Next image please.

how to use the

Here is the EUR/JPY volatility reading within the past 14 days.  As yo can see the 2.44 reading suggests the market’s high volatility and the .96 reading  reflects the market’s low volatility.. Now based on that information, the stop loss is placed at the 1.29  mark. Just  make sure our stop loss is at least half of the ATR’S volatility reading. In so doing, you don’t run the risk of incurring a humongous loss on your trading position.

Let’s say the EUR/USD moves 100 pips over a period of days. Why would you want to insert a 50 pip stop loss.For the life of me I don’t get this logic. But some traders, for reasons best known to themselves  contrive to commit this mistake. But then again you have to consider factors such as time frame and price action setup as well as the prevailing market structure.

Wide Stops Allow Long Trades Time To Play Out

The nice thing about employing wide stops is that the allow long trades time to play out. Big trades usually take days or weeks to unfold. If you think you can use 50 pip stop loss to catch a 300 pip surge, forget it. Let’s   look at illustrations of a tight stop loss and a wide stop loss,

 

Right before our eyes is a tight  stop loss at the support level at the 1.13300 mark. Like I intimated earlier, the problem   with such a tight stop loss option is that you don’t give your trading position enough room to find itself. And in  such a scenario, your tight stop loss is more than likely to be blown off the water together with your trading position.  And as you can see the stop loss has been totally stumped and the bulls are heading for the mountains.Now you see why you’re better going wide with your wide  stop loss?

Speaking of which, let’s take a look at  wide stop loss in its pomp.

Image result for wide stop loss

 

Now here is  a wide stop using the EUR/USD  in price action. Now as you can see the wide stop loss was placed a good 25 pips from the entry position at the 1.08500 mark. This is a very smart move.   Why? Because it keeps you   in the trade, giving him the opportunity to make a decent profit. Not to mention the fact that it gives your trade  more room to breathe.  Get your stop loss too close and you put a noose round your trade’s neck.

Wide Stop Losses Gives  You Trading Peace of Mind

If there is one thing traders value over everything is trading peace of mind. And wide losses gives you a whole  lot of peace of mind. They’re even more effective when trading higher time frames,  especially using the set and forget strategy. You don’t need to sit in front of your screen all day waiting for the market to approach your stops.

Instead you focus all your energies on finding the best trades available. And you can also identify trends and  common price action patterns – Things that really matter. So if you really want your trading peace of mind  to be at ease, here is a simple formula for you:Set your wide stops and tweak your position size to reflect your risk per trade;Nothing much to it.

 

That’s a wrap for ”Wide Stop Losses -Absolutely Crucial For High Probability Trade Success”. Too many forex traders lose their money to over-trading and tight stop losses so tight even a needle will  have a hard time getting through. They dont allow their trades room to maneuver.  And when you insert tight stop losses, your stop losses get stumped.

Unfortunately a lot of forex traders do not heed this advise. They rather tempt fate by placing a tiny stop loss on a trade that could play for weeks and bring in a huge profit in the process. Consequently their lack of understanding of position sizing, not to mention greed send them crashing to the ground.

So instead of placing a tiny tight stop on 20 traders, how about putting wide stops on two trades that last   go on and on for weeks ?And raking in profits in the process.

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 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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Then  subscribe to my mailing list and I’ll send my blog posts direct to your inbox. It wont cost you a penny.

Free Download

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. It sure did mine.

Opening Of Live  Forex Trading Account

If you’re looking to open a live trading account sign up with EasyMarkets.

But if you want to get a feel for the platform first  and practice your trading strategies before going live, open a free demo account with EasyMarkets.

 

 

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How To Place Stop Losses The Right Way

 

Hello and welcome to another edition of the bulls versus the bears. Today we are going to talk about how to place  stop losses the right way. Now placing stop losses are not  very popular among traders but  we do need to talk about it.  Stop losses are the big elephant in the room no trader wants to talk about.Sure we do have to make profits. But you do need to watch your back when the market does a 360 on your trading position. It’s absolutely crucial that you master the art of placing stop losses. Because if you don’t your trading account could suffer nuclear-sized losses that will make your head spin.   Aside risk management, your prosperity as a forex trader hinges on you placing stop losses the right  way. If you are able to master the art of placing stop losses, life will be a whole easier for you.

First things first

One Thing You Need To Drum Into Your Skull About Placing Stop Losses The Right Way .

One important thing you need to drum into your skull about placing stop losses the right way is that you can’t be picking up random amount of pips like you’re buying candy from a candy store. Sure you might think putting 20 pip or 50 pip stop losses may be the cook thing to do.  But Newsflash! It’s not!  Even worse, it’s not the professional thing to do as a trader either. You should base your stop loss on a level in the market. In other words, price will have to breach a certain barrier to make a fool out of your trade.  It’s almost like playing truth or dare. Basically you want price to prove to you that your initial trade was wrong. That proof can be found in what we call the most logical nearby level of support / resistance, assuming it has been breached.

Let me give you something  else to chew on while placing your stop losses. You  need to understand the market you are trading in and determine what key level price has to breach before rendering your initial trade completely useless. Let’s take a look at two examples.

First image please:

Image result for Is your stop loss too arbitrary?

Here is a classic example of a stop loss gone bad while trading the GBP/USD pair.. A stop loss is nicely placed at the 1.5150 mark which adds to 50 pips. Unfortunately for the poor trader, he missed out on a 100 pip payday, as indicated on the price chart. The moral of the story is you don’t just do a hail mary by placing a stop loss just for the sake of it. You  must find the nearest key level to place your stop loss, or else your trading position will be toast.

Now let’s  look at another image where the stop loss is placed at a key level the right way.

Image result for stop loss placed at key level

Now this is a pin bar pattern where the stop loss is placed at a key level of support the right. Unlike the first graphic the stop loss is placed at the most logical nearby key level,e pin bar. beyond the low of the pin bar. In this scenario, you save yourself from impending doom. Even more important you are given your trade more time to work its magic and give you more profits. At the same you are putting your stop loss at a place that will render your trade null and void in case price moves beyond it. In other words, decide how much you can afford to lose.

Beware Of Last 7 Days of Average Market Volatility

Ever heard of Beware of The Dog? The same sign  applies to the forex market’s market volatility. You absolutely have to beware of the last 7 days  of the forex market’s average volatility or Average True Range.  By volatility I refer to the periods when the market is on a high and when it’s on a low. Now why should Because you  want to calculate your stop loss market’s true range. Failure to do so could result in your stop loss taking a severe hit.  Now some of you may be wondering ” may be wondering “What in the world is Average True Range?” Well the Average True Range measures  the forex market’s average volatility over a fixed period, in your case 10 days.

Now let’s see how the ATR  looks like on your price chart

Average-True-Range-Indicator

This is nice-looking  price action involving the EUR/USD pair. The zig-zag lines at the bottom of the price action represent the ATR. Now the red arrows pointing at the peaks reflect the periods when the values are quite high.This represents the  market volatility that I’ve been harping about.. And the corresponding  red circles encircling the volatile candlesticks  correspond to the periods of volatility.

Now how do you fill your ATR values on your MT4 account? Simply go to and then select . The indicator then sets it default 14 day period option.  But since we are dealing with 7 days, you go to the bottom of the screen with your  cursor and select <ATR14 Properties>.  You should see the  following popup window as shown below:

Parameters-of-ATR-in-Forex-Trading.

 

You then look out for the <Parameters> tab as shown in the top far left hand corner. Next, you look out for the field labelled Period and change the default 14 to 10;since 10 days is the period of volatility that you will be working with. Hopefully you wont be pulling your hair using this tool.

Stop Loss Placement Tips To Keep In Mind

When placing your stop loss you’d do well to consider the risk reward and profit potential of the trade before taking the trade. If you find your stop loss too wide for your trade to create enough leg to operate ,  and the risk reward doesn’t add, up, I suggest you keep your cash in your pocket. Or else you’ll be gnashing your precious teeth.

Yes, risk reward and position sizing are related to stop loss placement. They are almost like Siamese twins. But you need to remember that stop losses take precedence over profit targets. In fact stop losses are a prerequisite for your profit target and risk reward. And they also help weed out trades you should jump on like Speedy Gonzales and trades you should outright reject.

Even more important, you should always keep your stop losses constant.  And you can’t keep them so wide either. Keep your stops wide,  and the market will blow by you like Speedy Gonzalez and smash your trading position like a ton of bricks.  So you tighten your stop losses, and place them around the key levels. Even more important, make sure that your stop loss strategy is part of your trading plan. For your own trading sanity it will be in your best interests to make your stop loss strategy part of your trading plan. Or else, your trading account will suffer excruciating pain.

Stop loss placement is as crucial to risk management  as apples are to oranges.Once you identify your stop loss placement you can then establish your position size and then know in advance the costs and risks of your trade. Think of stop loss placement as a cost to doing business as a trader. Also think of stop loss placement as your cue to exit  a trade when the trade heads south. The same way you exit a building at the speed of light when there is fire, you use that same  speed you to exit a trade. Sure, your emotions may persuade you stay in a trade even if it’s going to blow a hole in your trading account. But your peace of mind knowing that you are saving your account from imminent obliteration is just as important.

That’s a wrap for ”How To Place Stop Losses The Right Way”.  If you get your stop loss placement  right you are on your way to forex prosperity. Getting your stop loss placement right  gives you the freedom to calculate your profit targets on trades and position sizes.Even more importantly, you get to put your trading edge into action with your mind clear of clouds You also develop emotional control.. You’d be better off working out your stop loss first before anything else or else your trading account will be screaming “911.”

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 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?

Then  subscribe to my mailing list and I’ll send my blog posts direct to your inbox. It wont cost you a penny.

Free Download

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. It sure did mine.

Opening Of Live  Forex Trading Account

If you’re looking to open a live trading account sign up with EasyMarkets.

But if you want to get a feel for the platform first  and practice your trading strategies before going live, open a free demo account with EasyMarkets.

 

 

Set Your Trade Forget About It And Get On With Life

Hello and welcome to another edition of the bulls versus the bears. If you want to keep your sanity as a forex trader, I have a simple piece of advice for you. Set your trade, forget about it and get on with life.  This is my own spin on a popular strategy simply called “Set and Forget.” Basically what you’re doing is you make your trade, go chill for a bit and let the market handle the rest for you

Set and Forget  has two humongous benefits. First, it helps you keep your emotions in check. You trade based on your trading plan and not like a casino gambler. Second,  it allows you to live a normal life. Instead of staring at  your PC screen all day over-analyzing the markets, to perfect your trading system, you can leave the house and   hang out at the beach while your trade makes you money. So that by the time you get back, your profits would be nicely tucked away in your trading account.

Now how do you set your trade and forget about it?

Make More By Trading Less

That’s right. To make more money you need to trade less.  There is one cold fact you need to accept. The forex market has a mind of its own. It pretty much does as it pleases. So if you think you can control the market then you’ve got something else coming. The forex market  doesn’t care whether you’re Bill Gates or Steve Jobs. If you try to use one of those called magic bullet trading systems to try to  swing the forex market  in your favor, you could end up blowing a huge hole in your trading account. Your job is to stick to your trading plan and see if your trading edge exits on the forex market. If your trading edge is present ,you set your trade  and walk away.If your trading edge is not present, you still walk away. Why?Because there will always be opportunities to trade. The forex market is never static. It’s always generating new trading setups.

So What’s The Logic Behind Set and Forget?

Do not go beyond executing your trading edge unless it’s absolutely necessary. Failure to do so could set you on an emotional roller coaster and do crazy things such as overtrading, bloating your position size, Stretching your stop loss further from your entry trade,or moving your profit target further upstream for no reason. These bad habits will almost certainly blow a nuclear hole in your trading  account. Why? Because you are gambling instead of trading. And you are trying to control the forex market-an absolute no no.

Let me show you a few illustrations about how not to get too caught up with trades.

Image result for Forex market retraces to near entry point

First we see a retracement  on the uptrend with the EUR/PY pair. Now most inexperienced traders would have exited the trade for just a small profit or near breakeven out of fear of losing their money. Instead of making a panicky exit, how about giving  your trading plan time to work?. exiting out of fear will cause you to leave huge profits on the table. That’s why you set your trade and let the market work for you.

Let’s look at another example

Image result for pin bar sell signal

This is a classic illustration of a pin bar sell signal  using the AUD/USD signal/ However, the market stalls as it get to the low of the sell signal and falls back in line with the bearish trend. Now if you can hold your nerve and not interfere with your trade,  you could go short and make a nice profit.  In so doing you take your profit and run based on logical trading, and not on greed and raw emotions.

That’s a wrap for ”Set Your Trade Forget About It And Get On With Life” Using Set and Forget creates positive vibes for  your prosperity as a forex trader. Instead of spending the rest of your natural life analyzing market data, Set your trade, leave the house and let the market do the work for you. That’s assuming your trading edge is present on the market.

If you spend too much time hunting for trades in front of your screen, you suffer the following headaches. First you resort to emotional trading which cause you to incur numerous losses. This of course causes you lost money and valuable time which is better spent smelling the roses. Letting the market do the work for you gives you valuable peace of mind that can’t be quantified. It’s almost like taking a nap while the market rakes in the cash for you. Not to mention the fact that it improves your risk management without you spending another cent. With proper risk management you  can keep all your brain cells one piece.

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 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?

Then  subscribe to my mailing list and I’ll send my blog posts direct to your inbox. It wont cost you a penny.

Free Download

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. It sure did mine.

Opening Of Live  Forex Trading Account

If you’re looking to open a live trading account sign up with EasyMarkets.

But if you want to get a feel for the platform first  and practice your trading strategies before going live, open a free demo account with EasyMarkets.

 

Trading The Daily Chart Is The Only Way To Go

Hello and welcome to another edition of the bulls versus the bears.  Do you remember when we asked the question Should I use the One Hour and Four Hour Time Chart Time Frames To Confirm Daily Price Signals .Well we’re going to talk about trading the daily chart time frame.  In fact I dare say that trading the daily chart is the only  way to go.    And in fact, you should touch base with the daily charts before entering any trade.

Why should anybody trade the daily charts? because the daily chart has  a gold mine of information a trader cannot overlook. If anything the daily chart is where most of the trading action takes places,and of course that is where all the profit possibilities exists. Once you’re done reading this post, you and the daily chart will become bosom bodies.

I guess the first question  some of you will be :

How Do I Trade The Daily Chart?

Well,you should start by analyzing the last few months of price action trading on the daily time frame. The following questions should be occupying your brain cells while doing your analysis:

  • Is the market trending? And if so in what direction?
  • Is the market consolidating?And if so where is the high range and low range?
  • Where is the next resistance/support levels?
  • Do you see any patterns emerging on the charts?
  • Are we edging closer to a pivot number or round number
  • What is the relationship between the moving average and current price? Look up We’re Moving Averages Parts I and II

And while you’re glancing through your questions,make sure you mark key support/resistance levels that will help shape your market bias long or short term.  Based on this analysis, you should be more informed when entering your trades.   And you should be more comfortable making trades free of second guessing.

Now Why Do Traders Trade on Daily Charts?

Simple. Unlike the lower timeframes,  the price action is less chaotic and more reliable. In fact the price action is described in some quarters as smooth. Not only that,but you do get a clear perception of which direction the market wants to go. Unfortunately you don’t get that kind of clarity on the lower timeframes where you get nothing but deception.

Also you’ll be able to assess  your risk:reward in a higher probability setup than you’d normally do  in say a 15 minute time frame. The supply and demand swings that you see on a daily chart are more accurate than you’d normally see on a lower time frame. If you want to get ahead of other forex traders on the daily chart, get  a solid grasp of the potential profit vs risk concept.  Once you figure this concept out like the back of your  hand you should be laughing all the way to the bank.

Make More and Trade Less

If you want to profit from trading the daily chart,make more and trade less. How do you accomplish that? By switching to a higher time frame.  If you are the type trying to scalp on the 15 minute 30 minute,or 60 minute charts, I suggest you switch to the 240 minute(or 4 hr ) chart and end of day chart. Those lower time frames will certainly not help you.

Are There any advantages to Trading  The Daily Chart?

Sure. For starters the signals and patterns on the high time frames on the daily charts are  more reliable than those that you see on the lower time frames.  Often times what you might look like a chart pattern or candlestick pattern on a one hour timeframe could be nothing but fake  market noise. However,watch a chart pattern progress over several weeks on the daily time frame,and you’d most certainly want to jump in on that deal .

Another advantage of trading the daily chart is the cost of trading advantage. Most brokers  spreads and commission are the same regardless of your profit target. Let’s say you enter a trade for the EUR/USD pair and it has a spread of two pips. You then wind up paying 10% of the profits on a 20 pip target as opposed  to 1% of the profits on a 200 pip target. Now if you ask me that’s a huge difference in cost. Now if you are a short term trader, you may want to seriously consider your short term future as this could have a monumental effect on your bottom line.

Don’t OverTrade

If you want to profit on the daily chart, I have a simple piece of advice for you – DON’T OVERTRADE.   You do not want to develop an addiction to the price action by feeling the urge to  sneak in and out of the market every chance  you get. You experience so much blood rushing to your brain that you cn help yourself sometimes. This can only bring you nothing but grief and will only end up putting a nuclear-sized  black hole in your trading account.

When you overtrade, you feel you have to micromanage everything. You end up overanalyzing your charts, and  jumping in and out of trades. Even worse, you don’t trust the market enough to execute your trade when you enter your trade. You trade like a gambler rather than a logical thinker. You are thinking with your emotions instead of your brain cells. Even worse you  are only going with your gut feelings.

How Do I Get A Hold of  My Emotions?

Use what is popularly known as the “Set and Forget” Management Approach. Basically you set your Stop Loss and Take Profit target the moment you place your entry. Once you set your Set and Forget in motion, just get away from your screen and go to the beach while the market executes your trade for you. With a little practice you there will be no need for you stare at the screen all day scavenging for trades.

Look For Solid Trends

When trading the daily chart, look for what I call solid trends. Identify trends that have profit written all over them. You want to make sure you chart the least course of resistance. In other words, if a market is moving in  a particular direction, the odds of  price continuing in that direction are very high.

When searching for trends on a daily chart,make sure you’re looking at the right data. Here are a few techniques you may wan to employ when searching for emerging and established trends”

Swing Highs and Lows- Here the market makes high highs and higher lows during an uptrend. However it’s the reverse in a downtrend, where the market carves out lower high and lower lows.

50 and 200 SMA – The 50 and 200 periods are the most scrutinized as far as Simple Moving Averages goes.  Compare where price is relative to these averages, and look out for price crossing these levels. It could be a precursor to future price moves. Look up We are Moving Averages Parts 1 and 2

Trendlines – Trendlines come in very handy as far as identifying trends and potential reversal points goes. Be on the look out for possible breakouts outside the trendline as this could signal a possible reversal

Multiple Time Frame Approach

If you are an aspiring forex trader, I strongly suggest you the multiple time frame approach, or top down approach as it’s popularly known..  You start off by analyzing the longer time frames such as the monthly and weekly charts. Then you move down to the daily chart. Only then do you  analyze charts such as the 4 hr, 1 hr, or much lower.

A multiple time frame analysis helps in trade selection and filters out bad trades. You would definitely want to consider the daily chart as part of you r multiple time analysis.   If you’re looking for support and resistance levels to trade off off, the daily chart is the place to look. It will be in your best interest to follow what’s happening on the daily chart, regardless of  your timeframe of choice. Whether you’re day trader or swing trader, you will want to ride on the momentum of the daily chart.

Now if you trade solely on one time frame, you could be trading straight into a hurricane. You could  be trading straight into a key support/resistance level, or the trend in your time frame could be nothing but a correction. Or even worse, you could be walking straight into a candle reversal situation. It definitely pays to expand your time frame horizons in order to catch profitable trades.

Combining Swing Trading With Daily Chart

Do you realize that you could make a killing combining swing trading and the daily chart? Sure you can. You can start by coming the daily chart and the 4 hr chart to look for price signals and polish up your trade entry.

Now how can you use swing trading to combine both time frames and create a gold mine? First plot all major levels on the daily chart including support/resistance levels, and supply and demand levels. Then zoom down to the 4 hr level to monitor price interaction  at these levels. You now establish the 4 hr timeframe as your trade entry timeframe.

You then look for a strong price rejection such as  a reversal candlestick pattern or a strong breakout through these high time frame levels. This should serve to create high probability setups for you as a swing trader.

With your end of day  strategy, you can assess  your risk versus reward  in a higher  probability manner instead of   hourly or 15 minute manner  The supply and demand swings on the  daily chart are more reliable than on the lower timeframes. Having a solid grasp of the profit vs risk on a trade as projected on the chart  will put you streets ahead of other traders that ignore this type of analysis.

That’s a wrap for ”Trading The Daily Chart Is The Way To Go”   The importance of incorporating the daily chart time frame in your trading cannot be emphasized enough.  In fact trading in a higher time frame is the fastest way to increase your profitability as a trader.

Psychologically you will be a free man as well. You don’t need to spend the whole day in front of your screen scavenging for trades that may not even exist. Just activate “Set and Forget” and let the market execute your trade for you. You can head to the beach and come and check your profits sitting comfortably in your trading  account. Even more important learn to detach your emotions while you trade. Just leave things alone and your sanity intact.

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 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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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. It sure did mine.

Opening Of Live  Forex Trading Account

If you’re looking to open a live trading account sign up with EasyMarkets.

But if you want to get a feel for the platform first  and practice your trading strategies before going live, open a free demo account with EasyMarkets.