TRADING PSYCHOLOGY
FX
be a trading opportunity, it isn’t the best trading opportunity and therefore I’d rather keep my money on the sideline.
Chart 1. 4-hour chart
type of price pattern is called a bullish Flag and it traditionally results in a continued move to the upside. With stop placement being below the area of consolidation and targets being at an anticipated equal measured move higher, the trader is offered nearly a 1 to 6 risk to reward ratio making this a phenomenal trading opportunity. However…
Te weekly chart (see chart 2) presents a warning sign informing us that this trading opportunity might not be as good as it seemed at first glance.
Although price has recently broken out from the highs of an ascending triangle, the high momentum move came to a halt directly at a previous bearish rejection zone, signaling an area of potential selling pressure. Tis tells us that, at this particular level, we need to be aware of both profit taking from the buyers (sell orders) and renewed selling interest from the sellers (sell orders). Does this mean that price can’t continue higher? No, of course not. Te market can do whatever it wants, whenever it wants. What it does tell us however, is that although this could
I teach my students that the number 1 rule of trading is “Don’t Go Broke” and we look to do that by capturing profits from good trades, while refraining from giving profits back on bad trades. A trader who is simply looking for trades has an increased chance at finding action, but realize that this also comes with an increased chance in losing money. In the example above a trade hunter would have ignored the higher timeframe analysis because their only need was to involve themselves in the market. On the other hand, a trader valuing performing good analysis over finding trades would have taken all factors into account instead of impulsively jumping into a trade that they may end up regretting later.
Te market is never short on offering opportunities to trade. Te problem lies in the individual trader being short on patience and their inability to wait for the best trades. If you remember anything from this article I want you to remember this. Most traders don’t have a problem capturing profit from winning trades. Tey struggle and eventually fail because they can’t stop handing that money (and more) back to the market when they lose. Te turning point in my trading career came from trading less and shiſting my focus from finding trades, to performing good analysis. Sure, it may not be as exciting, but it’s a lot more profitable.
Akil Stokes Chart 1. 4-hour chart
Head Forex Trader & Trading Coach
www.TradeEmpowered.com
FX TRADER MAGAZINE October - December 2017 63
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