The Forex Trader Safetrading Checklist
A Forex trader just starting out can easily be tempted! What appears to be a great setup can very soon turn into a disaster. Forex traders the world over can probably identify with this experience:
Price has been consolidating for a while, perhaps a couple of hours.
You enter a limit order so when price hits the top of the channel your trade gets filled.
Just minutes later after your trade has been filled, you see a loss of 10 pips, then a minute later, 15 pips, and a short time after that, wham, your stop is hit and you are out with a 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?"
The newer Forex trader can be protected from making fundamental mistakes by setting up a Safetrading Checklist so embed certain good habits in the brain all the while gaining valuable trading experience.
Having a strict routine in place means the Forex trader doesn't go into a trade unless all the criteria have been met. This helps avoid the problem of being drawn into the market just because of sudden price movements which can panic the trader into a trade afraid they are going to miss out on a good 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.
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:
MACD on either the 4 hour, 1 hour or 15 minute time frames are showing negative divergence.
MACD is pointing down on the one hour or four hour charts.
Price is well above the Central Pivot Point for the day.
With the 200 EMA plotted on the 4 hour, 1 hour and 15 minutes charts, price is below the 200 EMA on the two higher time frames but above it on the 15 minute chart. In other words price is bucking the trend.
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:
There is positive divergence on MACD on the 4 hour, 1 hour, or 15 minute chart.
The 4 hour and 1 hour charts show MACD pointing up.
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 Of All
While fewer trades may be undertaken through using a Safetrading Checklist, it does teach the new Forex trader a very important lesson in patience! Waiting patiently for a good setup, a high probability trade, requires that the Forex trader really discipline his mental and emotional energies.
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. - 23208
Price has been consolidating for a while, perhaps a couple of hours.
You enter a limit order so when price hits the top of the channel your trade gets filled.
Just minutes later after your trade has been filled, you see a loss of 10 pips, then a minute later, 15 pips, and a short time after that, wham, your stop is hit and you are out with a 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?"
The newer Forex trader can be protected from making fundamental mistakes by setting up a Safetrading Checklist so embed certain good habits in the brain all the while gaining valuable trading experience.
Having a strict routine in place means the Forex trader doesn't go into a trade unless all the criteria have been met. This helps avoid the problem of being drawn into the market just because of sudden price movements which can panic the trader into a trade afraid they are going to miss out on a good 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.
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:
MACD on either the 4 hour, 1 hour or 15 minute time frames are showing negative divergence.
MACD is pointing down on the one hour or four hour charts.
Price is well above the Central Pivot Point for the day.
With the 200 EMA plotted on the 4 hour, 1 hour and 15 minutes charts, price is below the 200 EMA on the two higher time frames but above it on the 15 minute chart. In other words price is bucking the trend.
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:
There is positive divergence on MACD on the 4 hour, 1 hour, or 15 minute chart.
The 4 hour and 1 hour charts show MACD pointing up.
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 Of All
While fewer trades may be undertaken through using a Safetrading Checklist, it does teach the new Forex trader a very important lesson in patience! Waiting patiently for a good setup, a high probability trade, requires that the Forex trader really discipline his mental and emotional energies.
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. - 23208
About the Author:
Learn how to use the MACD Technical for safe trading. Click here: MACD Technical Know your candles! Use the free Candlestick Pattern Instant Recognition Library here: Candlestick Pattern
posted by X - Men @ 3:49 AM
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