The last time out we were looking at a daily strategy that I’m currently trading, which is easy to do if you’re working full time. Where we left off, I was wondering where the market was going to go based on the following daily EUR/AUD chart:
I am fond of drawing trendlines in the following manner: I connect the swing lows of candles to form upward trendlines, and I use the swing highs of the chart candles to draw the downward trendlines. As I was looking at this chart, I was wondering if price action would bounce upwards off the red uptrend line, and, when it crossed the five EMA line (also read) with the RSI above 50, as well as price action being above the 200 EMA (white line), all converge into a very strong buy signal. Let’s look at what the market actually did:
heading upwards, with the signal candle being indicated by the yellow arrow being the entry for a buy position which I usually take for 50 pips. But take notice – the RSI barely touched the 50 line. The proper entry rule for this trade is to wait for price action to close 10 pips above the 5 EMA and the RSI to be above the 50 line for a long (buy) position. In this instance, with strong indicators from my trendlines as well as the 200 EMA, I opted for the buy, which turned into a 63 Pip move, for which I got my 50 pips. Now technically, this was a bit of a borderline call; however, I’ve had lots of practice using the trend line shown in the charts, which gave me sufficient confidence in terms of taking a buy position in this scenario. Without the extra filtering given by the trendlines, this might’ve been a missed opportunity for me, as I tend to act conservatively when placing trades. Although careful traders should “expect the unexpected”, we also need to be aware of the fact that we have trust our instincts, especially when they are backed up by many months of practice and observation. Another point to take into consideration is the fact that earlier on, I took a short position when the RSI was below 50, the previous day candle closed more than 10 pips below the 5 EMA, and price action had bounced off of the downward trend line (all short indicators), yet price action was above the 200 EMA, which bodes an uptrend, yet I still took the short trade. The point I’m trying to make through all of this is that there’s NOTHING LIKE EXPERIENCE, which is why it’s very necessary for beginners to practice, practice, practice. And unless you are very confident and comfortable with the trade your placing, you’re better off not trading until such time that you are, and the only reasonable way to do that is by wearing out your practice account. Sadly, I talk to a lot of people who have actually lost lots of real money by not following that advice. And I should know, because I was one of them…but I learned my lesson, and, even though I regularly trade my live accounts, I still spend most of my time trading my demo account. I found it gave me something more compelling than profit: and that is confidence.
Another great way to build confidence as a trader, is to be a part of the trading group, we can learn the skills that can make you a real pro! A great place to start is the Slick Trade Academy – not only will you have access to great training materials, but you can get live trade signals, as well as expert advisors (robots) that you can use to enhance your trading. So why not consider signing up for Sapphire membership in Slick Trade Academy? You’ll be glad you did!
That’s all for this week – have a great week and good luck in the market! JC