TRADING STRATEGy
WHAT MAKES UP A GOOD TRADE
Let us digress just a bit and describe what makes up a good trade. First we want a point of entry value and an expected exit value that provide a sufficient profit to justify the risk we are taking. Our risk is the difference between our
entry value and our
stop/exit value. Since most traders, ourselves included, have difficulty performing all that math in an instant, a visual method of “seeing” a potentially good trade is an advantage in rapidly changing markets.
That is where “seeing the music of the market” can help you select potential trades almost instantly. A trader who learns to “see the music of the markets” can visualize on the chart the potential trade entry point, his exit/stop and his profit target as points on the chart. With practice, the trader can connect those points in his mind with lines – instantly compare the length of the lines thereby completing his trade analysis almost
instantly.
done before getting to that level of proficiency. First we have to learn to “see the music” of our selected market. Fortunately, we have
the music” a bit easier.
HOW CAN WE SEE THE MUSIC OF THE MARKET?
There are probably many other ways to arrive at the ability to “see the music of the market”. We are going to tell you how we do it, because it works for us. It is our hope that you will be able to do something along the same lines and make it work for you. It is well worth the effort – and let us be honest – it does take some effort to learn.
Seeing a potentially good trade before it happens is not easy
With
practice, it really is just that easy. Okay, there is a bit of work to be
developed a method that makes it much easier to “see the music” of most any market. It provides a “sheet music” look on the price chart, which should make “seeing
We begin with our price chart. This is the basic tool of the technical trader. We use a particular type of chart and our results are based on using that particular type of chart. First, we use tick bars rather than minute bars. We consider the use of tick bars an essential part of our system because they respond to market tempo automatically – providing more bars as trading accelerates (sometimes by a factor of ten or more). Since almost all indicators are calculated on a bar by
bar basis, tick bar indicators react to tempo changes quicker than minute bars.
Our first step is to create a chart FX TRADER MAGAZINE January - March 2012 65
FX
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