The Forex Trader Safetrading Checklist
The Forex market can lure the novice Forex trader into trading scenarios that appear very attractive at first glance but turn very quickly into a losing trade. Many a Forex trader will relate to this experience:
Price has been in a consolidation channel for one or two hours.
In an attempt to get taken into a trade at the top of a channel you place an entry order at a strategic place.
Within a few minutes your trade is in and within a few minutes more you are looking at a loss of -10 pips, then -15 pips, and then your stop gets taken out.
It's ironic isn't it? Price was static almost for hours. Yet the minute your trade is entered price moves right against your position and you get stopped out. All you can do is scratch your head and exclaim: "What happened?"
In the early stages of gaining trading experience, it is good for the novice Forex trader to go by a checklist every time before entering a trade until certain habits become ingrained.
Just having a procedure in place that has to be executed before pulling the trigger on a trade can prevent the Forex trader from quickly entering a trade just because there are some sudden movements on the screen and the trader is worried about missing an opportunity.
It's true that having to go through a checklist may delay entering a trade so that the price moves on before we have chance to submit our order. However, the number of times this happens is quite rare whereas the benefits of waiting far outweigh the missed opportunity.
For a very cautious approach to trading the newer Forex trader can use this Safetrading Checklist to determine whether the potential trade setup is likely to be high probability or low probability.
Safetrading Checklist
Avoid Long Trades If:
There is negative divergence on MACD on the 4 hour, 1 hour, or 15 minute chart.
MACD on the 4 hour or 1 hour chart is pointing down.
Price is well above the Central Pivot Point for the day.
Price is bucking the trend on the 4 hour, 1 hour, and 15 minute time frames. (You can ascertain this by plotting a 200 EMA on these three charts and seeing if price is below it on the 4 hour and 1 hour but above it on the 15 minute.)
Price is above a Fibonacci 50, 62, or 79 retracement (calculated from the last high and low)
Your stop is not below multiple layers of support such as a significant previous high or low, pivot point, or Fibonacci level.
Avoid Going Short If:
MACD on either the 4 hour, 1 hour or 15 minute time frames are showing positive divergence.
MACD is pointing up on the one hour or four hour charts.
Price is well below the Central Pivot Point for the day.
Price is bucking the trend on the 4 hour, 1 hour, and 15 minute time frames. (You can ascertain this by plotting a 200 EMA on these three charts and seeing if price is above it on the 4 hour and 1 hour but below it on the 15 minute.)
Price is below a Fibonacci 50, 62, or 79 retracement (calculated from the last high and low)
Your stop is not above multiple layers of resistance such as a significant previous high or low, pivot point, or Fibonacci level.
The Most Important Lesson
Using a Safetrading Checklist list in this manner might mean you take fewer trades. However, the Forex trader hereby learns a very important lesson. What? PATIENCE! A Forex trader might find that simply waiting for the high probability trade to setup does take a lot of mental and emotional energy.
This is probably the most important lesson the new Forex trader will have to learn. Using a Safetrading Checklist like the one above can make the Forex trader slow down, engage in thorough analysis using the technical indicators available, and really start to make progress as a Forex trader. - 23210
Price has been in a consolidation channel for one or two hours.
In an attempt to get taken into a trade at the top of a channel you place an entry order at a strategic place.
Within a few minutes your trade is in and within a few minutes more you are looking at a loss of -10 pips, then -15 pips, and then your stop gets taken out.
It's ironic isn't it? Price was static almost for hours. Yet the minute your trade is entered price moves right against your position and you get stopped out. All you can do is scratch your head and exclaim: "What happened?"
In the early stages of gaining trading experience, it is good for the novice Forex trader to go by a checklist every time before entering a trade until certain habits become ingrained.
Just having a procedure in place that has to be executed before pulling the trigger on a trade can prevent the Forex trader from quickly entering a trade just because there are some sudden movements on the screen and the trader is worried about missing an opportunity.
It's true that having to go through a checklist may delay entering a trade so that the price moves on before we have chance to submit our order. However, the number of times this happens is quite rare whereas the benefits of waiting far outweigh the missed opportunity.
For a very cautious approach to trading the newer Forex trader can use this Safetrading Checklist to determine whether the potential trade setup is likely to be high probability or low probability.
Safetrading Checklist
Avoid Long Trades If:
There is negative divergence on MACD on the 4 hour, 1 hour, or 15 minute chart.
MACD on the 4 hour or 1 hour chart is pointing down.
Price is well above the Central Pivot Point for the day.
Price is bucking the trend on the 4 hour, 1 hour, and 15 minute time frames. (You can ascertain this by plotting a 200 EMA on these three charts and seeing if price is below it on the 4 hour and 1 hour but above it on the 15 minute.)
Price is above a Fibonacci 50, 62, or 79 retracement (calculated from the last high and low)
Your stop is not below multiple layers of support such as a significant previous high or low, pivot point, or Fibonacci level.
Avoid Going Short If:
MACD on either the 4 hour, 1 hour or 15 minute time frames are showing positive divergence.
MACD is pointing up on the one hour or four hour charts.
Price is well below the Central Pivot Point for the day.
Price is bucking the trend on the 4 hour, 1 hour, and 15 minute time frames. (You can ascertain this by plotting a 200 EMA on these three charts and seeing if price is above it on the 4 hour and 1 hour but below it on the 15 minute.)
Price is below a Fibonacci 50, 62, or 79 retracement (calculated from the last high and low)
Your stop is not above multiple layers of resistance such as a significant previous high or low, pivot point, or Fibonacci level.
The Most Important Lesson
Using a Safetrading Checklist list in this manner might mean you take fewer trades. However, the Forex trader hereby learns a very important lesson. What? PATIENCE! A Forex trader might find that simply waiting for the high probability trade to setup does take a lot of mental and emotional energy.
This is probably the most important lesson the new Forex trader will have to learn. Using a Safetrading Checklist like the one above can make the Forex trader slow down, engage in thorough analysis using the technical indicators available, and really start to make progress as a Forex trader. - 23210
About the Author:
Master the MACD Analysis for safe trading. Click here: MACD Analysis Learn to use candles! Use the free Candle Charts Instant Recognition Library here: Candle Charts
posted by X - Men @ 3:51 AM
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