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 consolidating for a while, perhaps a couple of 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.
Almost as soon as your trade is activated you notice it is down 10 pips. Minutes later that has gone to 15 pips. Before you can blink, your trade is out, having hit your stop loss.
Isn't it amazing. Price has hardly done anything for hours. Yet the moment your trade is entered price moves dramatically against you and your trade hits the stop leaving you bewildered and thinking to yourself, "Whatever 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.
This may of course delay things as you go through your checklist and you may end up missing an opportunity while you make sure all the criteria are met. But better to miss the occasional opportunity than regularly go into trades in a rush and regret it.
The Safetrading Checklist that follows can help make a new Forex trader cautious, so only high probability trades are considered which in turn leads to a preservation of trading capital.
Safetrading Checklist
Avoid Long Trades If:
The 4 hour, 1 hour or 15 minutes charts are showing negative divergence on the MACD indicator.
The 4 hour and 1 hour charts show MACD pointing down.
Price is well above the daily central pivot point.
Price is below the 200 EMA (Exponential Moving Average) on the 4 hour and 1 hour chart but above the 200 EMA on the 15 minute chart. (With this setup on the 3 times frames price is bucking the overall trend and can turn against you at any time.)
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 Short Trades If:
MACD on either the 4 hour, 1 hour or 15 minute time frames are showing positive divergence.
The 4 hour and 1 hour charts show MACD pointing up.
Price is well below the Central Pivot Point for the day.
With the 200 EMA plotted on the 4 hour, 1 hour and 15 minutes charts, price is above the 200 EMA on the two higher time frames but below it on the 15 minute chart. In other words price is bucking the trend.
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 Of All
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.
When it comes to the learning curve, this is probably one of the most important skills the Forex trader will have to master. A Safetrading Checklist forces the trader to just slow down and give careful thought and consideration to the array of indicators presenting a flow of information. Once the new Forex trader gets to this stage, real progress can start to be made. - 23226
Price has been consolidating for a while, perhaps a couple of 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.
Almost as soon as your trade is activated you notice it is down 10 pips. Minutes later that has gone to 15 pips. Before you can blink, your trade is out, having hit your stop loss.
Isn't it amazing. Price has hardly done anything for hours. Yet the moment your trade is entered price moves dramatically against you and your trade hits the stop leaving you bewildered and thinking to yourself, "Whatever 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.
This may of course delay things as you go through your checklist and you may end up missing an opportunity while you make sure all the criteria are met. But better to miss the occasional opportunity than regularly go into trades in a rush and regret it.
The Safetrading Checklist that follows can help make a new Forex trader cautious, so only high probability trades are considered which in turn leads to a preservation of trading capital.
Safetrading Checklist
Avoid Long Trades If:
The 4 hour, 1 hour or 15 minutes charts are showing negative divergence on the MACD indicator.
The 4 hour and 1 hour charts show MACD pointing down.
Price is well above the daily central pivot point.
Price is below the 200 EMA (Exponential Moving Average) on the 4 hour and 1 hour chart but above the 200 EMA on the 15 minute chart. (With this setup on the 3 times frames price is bucking the overall trend and can turn against you at any time.)
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 Short Trades If:
MACD on either the 4 hour, 1 hour or 15 minute time frames are showing positive divergence.
The 4 hour and 1 hour charts show MACD pointing up.
Price is well below the Central Pivot Point for the day.
With the 200 EMA plotted on the 4 hour, 1 hour and 15 minutes charts, price is above the 200 EMA on the two higher time frames but below it on the 15 minute chart. In other words price is bucking the trend.
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 Of All
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.
When it comes to the learning curve, this is probably one of the most important skills the Forex trader will have to master. A Safetrading Checklist forces the trader to just slow down and give careful thought and consideration to the array of indicators presenting a flow of information. Once the new Forex trader gets to this stage, real progress can start to be made. - 23226
About the Author:
Master the MACD Analysis for safe trading. Click here: MACD Analysis Learn to use candles! Use the free Candlestick Charts Instant Recognition Library here: Candlestick Charts
posted by X - Men @ 3:49 AM
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