The ability to be able to coolly, dispassionately calculate where price is likely to go next (based on previous patterns) is what trading from charts is all about.
If you can master the technical skill that is half of the battle, but many, many traders fail due to the fact that they can not control their emotions.
If you learn to plan ahead and then follow that plan to the letter you will remove as much emotion and silliness as possible.
How To Plan A Forex Trade
I do my analysis and plan for the week ahead on a Sunday. I plot areas where I believe price is likely to react and write down my reasoning in my trade journal. I am looking for as many reasons as possible for why price is likely to react in a particular area. In the first week of the course I showed you some of these “reasons,” support and resistance in all its forms being the main part of the equation in my trading.
I start by looking at monthly charts and make a note of candle sticks and previous major support and resistance. These areas on longer time frames are stronger than smaller ones in my experience. For example lets say the Euro/$ hasn’t broken a support line for 5 years, is that likely to be an area where traders expect it to at least react? Traders all over the world will be looking in the same area and therefore a bounce often becomes a self-fulfilling prophecy. Trading any commodity using charts is one of those instances in life where we want to be running with the herd. If the majority of traders are shorting (selling) the Euro for example why would I want to buy?
Which Pairs to Trade
Having studied monthly charts I next go down to weekly, daily and even 4 hour charts, repeating the process on each time frame. I then check out the news, I use Forex Factory.com both for their calendar and news reports as well as looking online at various financial publications that cover my preferred currencies.
I spend 3 or 4 hours on a Sunday making my plan for the week ahead I then provide this information to members of my forex mentor group BUT the most successful students do their own analysis BEFORE looking at mine. The goal is to teach folks how to look for potential forex trades for themselves.
Why Its Essential to Plan A Forex Trade
Devising a forex trade plan is something a lot of traders can not be bothered to do. New traders in particular simply can’t wait to get started to trade. What they are really doing is gambling. Those who do not fully understand what is going on in the markets and simply dive in to trades that have already started are NOT forex traders. How do I know? I spent the first 3 years learning to trade and even though I have never been interested in gambling in my life, in reality thats what I was doing and of course losing.
I started to become successful when I started to treat my trading as a business, keeping accurate records and making careful plans ahead of time. Look at it this way, you wouldn’t start a business without a business plan, and with forex it’s the same, never start trading until you have a forex trade plan in place.
Success in the markets is a function of discipline, and most people simply do not have enough self-discipline to determine if they are trading emotionally or objectively. This is where having a defined forex trade plan comes in; a forex trade plan will act as a guide which will keep you on the disciplined trading path.
Trading without a forex trade plan would be the same thing as driving without knowing where you’re going. You’re trying to get to this goal of “consistent profits,” but since you have no way of knowing whether you’re heading in the right direction, you’ll most likely end up going bust.
With a forex trade plan, you’re able to know if you’re heading in the right direction. You’ll have a framework to measure your trading performance and you are able to monitor this continually. This allows you trade with less emotion and stress.
All of this and more is covered in detail in my low cost 5 * rated forex mentor program. I and my fellow mentors show you how to trade successfully using proven strategies but also showing you how to properly establish your trading business. Before you waste another penny trading without really knowing what you are doing you need to find a mentor. Someone who has been where you are now and has learned (the hard and expensive way) what NOT to do. I have mentored many 100’s of people in different ways.
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