Be a good listener to market’s story. As the market moves, it “tells” a story.
21-day, 3% rule when learning new knowledge.
Use indicator (not emotion) to determine entry/exit points. Too many indicators can create confusion.
Candle stick pattern, ideal vs realistic.
SMALL a, b, c, d’s FORM INSIDE C, D’s
Now that we know that the market moves at different speeds, we need to look
a little deeper into that movement. If the distance between a C and a potential
D is substantial, and there are no fundamental announcements, the market
often forms small a, b, c, d’s between the C, D. This is important to recognize
because most traders are very impatient and want instant gratification. If a
trader has entered the market long or buying, every time the market begins to
retrace or dip, the trader starts to panic and is tempted to exit.
A good habit to get into is to envision the market movement before you
execute the trade. Draw out how you envision the future wave will be. Try
to figure out the amount of time you will need to be in that trade. Then
decide to be a scalper, a day trader, or a long-term trader before you enter
the market. This will keep you from getting frustrated and emotional as you
trade. You must never forget the ebb and flow of the markets and that these
markets wave. It is a natural wave. Very seldom will they race to your
target, regardless of how much you want them to or how little time you have
set aside for trading. The market moves at its own pace, not ours.
STEPS TO BE FOLLOWED WHEN TRADING AN UPTREND
1. Draw all uptrend lines and downtrend lines, inner, outer, and
long-term. (This will help to determine if the market is in an
uptrend, downtrend, or if a trend line has been broken, signifying
the potential end of a trend or a reversal.)
2. Find the latest upward A, B and use the Fibonacci tool on your
trading software to draw the Fibonacci retracement and extension
lines.
3. Find a C buy-entry at a convergence, such as a Fibonacci
retracement level, upward trend line, morning star, tweezer bottom,
or bullish engulfing candle.
4. Find the projected Fibonacci D extension, as well as four levels of
past resistance. Find the closest level of resistance to the Fibonacci
extension. Place a limit exit order 10 pips in front of, or before it
hits, either the Fibonacci extension or the level of resistance
(remember when the bulls score a point it always pulls back).
5. Look at your potential financial risk with your protective stop-loss
order. If you can’t afford the potential loss should the trade not work
out, then stay out and do not trade!
6. Pull out your trader’s checklist that you have created or the one
supplied by Market Traders Institute. Create a trading plan and
trade your plan.
Trap or fake breakout
straddle
This strategy will work provided your broker will allow you to trade this
way (currently at www. I-TradeFX. com, a Forex Broker, you can straddle
the market in this fashion). Please check with your broker first before
attempting to trade using this strategy. Because of the increased volume of
people wanting to trade the fundamentals, not all brokers can handle the
increased trading volume during announcements.
This strategy is called a straddle and was designed for trading in tight
trading ranges in anticipation of a fundamental announcement. It is very
important that there is a fundamental announcement to be released and that
the market range is between 20 and 60 pips. In order to trade a straddle
effectively, the market needs to create a tight level of consolidation before
the announcement, which, in turn, will provide a straddle opportunity. As a
rule, the longer the market has been in the range, the more aggressive the
outbreak will be (see Figure 11-6).
When you see consolidation forming before a fundamental announcement,
turn to a smaller time frame, such as a 30-minute chart. Place your
straddle orders five minutes before the announcement is made. Place a buy
order 15 pips above or north of the resistance level and 10 pips below or
south of the level of support, or the trading range. Why 15 pips above
and 10 pips below? All currencies have a bid-ask spread that is between
3 and 5 pips. Place your stop-loss orders 15 pips above the last high for the
sell order and 10 pips below the last low for the buy order. The reason your
buy entry order is 15 pips above the last high is because traders look at
bid charts, which reflect the selling price at a particular moment. Because
there is a spread between the bid and the ask price, we need to add the extra
5 pips to compensate for the difference. This precaution will keep you from
being taken into the market too early.
You should also consider not trading if the trading range of the consolidation
is greater than the amount of money you are willing to lose should
the trade not work out. Always remember that the market can break out in
either direction.
It is important that you create two trading plans with entry points, stoploss
orders, and limit orders for profit in both directions. It is also important
to mentally work through a “what if ” scenario. You need to remember
the market can go north or south. If the market goes south, look for past
levels of support to exit with a profit before the bears score any points and
begin pulling back. The opposite will take place if the buy order is triggered
first—look for past levels of resistance to exit with a profit before the bulls
score any points by taking out those highs or past levels of resistance. Bulls
also pull back after making a new high and scoring a point.
No comments:
Post a Comment