I use the daily charts purely for analysis. This helps me identify strong resistance/support levels of any given currency pair. Before the start of the new week, mostly on Sunday night, I analyse the weekly charts to see where the particular pair is likely to head to. I make notes in my trading journal noting down any major support/resistance levels that I will be looking for as the week progresses. My method is purely based on price action. I use support/resistance levels and candle stick patterns to decide when to take a trade and when to get out.
Before I go short or long, I calculate my expected profit and my expected loss should the trade go against me. I check to ensure that there are no major news alerts affecting that pair for the duration I will be in the trade. I do news trading too but that will be a topic for another blog entry - this one is about confidence.
On this past Friday, I had an argument with my forex student.He has been a great student and has learnt a lot. He is good at analysing the charts and identifying trends. The argument was about the cable (GBP/USD). From his analysis, he believed it was going to be bullish. I on the other hand believed it was going to be bearish. I love doing my own analysis and also letting my students do their own analysis and we compare notes. On this particular time, we had different opinions.
I was very confident about my analysis that I set my pending order. I can assure you that I made over 80 pips on that one trade. I hit my daily target and entered the weekend a happy trader. If I never had confidence in my trading method, I would have given in to my student and given up on the trade.
As a trader, you need to be sure of your method. It is the only way you will gain confidence in the markets.
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