My free Forex setups that I post every week are to help traders learn how to trade. It’s that simple. Making the pips you make is a bonus but understand that my main goal is to provide you with free education.
Trading is never perfect and there will be times that the setups don’t go as expected.
That’s fine. That’s the business.
You can often times, depending on the failure of the setup, take a shot in the other direction. That is reserved for more experienced traders who can read price action with a little more clarity.
Why do I do this work for you? Paying it forward.
I want to teach you to fish so in any part of the world and at any time you choose, you can fire up your charts and make money – on your own.
I don’t post every trade setup that I look at nor do I take every setup that I post. If you are not considering overall portfolio risk or being too side on the strength/weakness of one currency, you are asking for trouble.
Two that I want you to learn from are shorts I am holding on GBPJPY and EURJPY that were not posted in the setup section.
Forex Trades Thought Process
This short on the GBPJPY was using a previous rally measurement as noted by the first blue arrow. I projected that from the low (the second arrow) and that gave me a rough idea of how far a pullback should go before running into trouble.
One price hit the zone, notice there was no follow through in price to the upside. Dropping to our usual lower time frame chart of four hours, the weakness was obvious.
The entry was using a breakout on the four hour chart to get in on the pullback prior to the daily chart breaking the low before the rally. This allows momentum to quickly carry the trade into profit if it works out.
This EURJPY chart was a pullback after a big fall in price. The oversold condition can work itself off via price – the pullback, or via time – the consolidation.
The green circle shows a price rejection but that gives information. That information to me in this context was the buyers were not strong enough to continue the move upwards.
The faint grey line is from the four hour chart and represents an inner support zone. That is where I kept alerts on to see what price action looked like when the breakout occurred on the four hour chart.
Again, using lower time frame breakouts to catch the momentum on the higher time frame pullback and continuation.
Trades Are Never Perfect
Could I have used even lower time frames for a better entry price? Maybe, but where does it end? Trading rules will save you from doing something stupid and if you don’t have rules you consistently use, you will eventually fail.
At the end, your position size or how much you make per pip can often determine how much you trade. Low funded account holders often trade more often because the position sizing is too small.
Large account holders can hold out for the best setups and triggers because each pip is significant in both profit and loss. If you think about it – if you had these two positions as an example at an average of $5 pip, that is $2500. More than some people make in a month!
Trade smart and watch your risk!
Hi, I have checked the screenshot of your two trades short for EURJPY and GBPJPY (the section where you show the trade, stop loss , price, current price and total profit pips made) and I see that you do not have anything on take profit. Do you always trade without a take profit level?
I don’t generally set a take profit level if my goal is to trail the stop. How else will you get alpha if you keep cutting the potential out of a trade?
However, if price action develops that hints at an exhaustion of the move as I saw in GBPJPY, I will close the trade. That GJ ended at 144.25 for 364 pips because I saw exactly that occur. The EJ got hit at the trailing stop at 128.40 for 139 pips. Why no profit target as a general rule? There is with a counter trend trade but for trend trades, I’ve seen it too many times where the target gets hit with momentum…and price continues to move.
Understanding price – basically everything I talk about on the charts I post and recap – I know what adverse price action looks like and know what I don’t want to see happen on the chart.
SD, What is the difference between managing a trade and micro managing a trade?
Managing a trade is setting conditions on where you will reduce risk or scale out. Micro managing is when traders keep peeking at the market to see what it is doing and adjusting stops and targets consistently. It all boils down to one thing in the end: HAVE A TRADE PLAN. FOLLOW A TRADING PLAN!
thanks for the article it was enlightening. What are your views on overtrading or is there anything called overtrading at all?