Hey traders how is everything? How is your trading going so far this week?
I want you to tell me something… How do you decide what currency pairs are you going to trade each day?
Do you do some kind of analysis before you start trading? Or you just pick randomly the currency pairs? Or word yet… you trade the same currency pair(s) every single day no matter what?
Think about that question… because I believe that the answer to that question could have a very large impact on your trading.
Think about it…
- What if you traded only the currency pairs that have the clearest market conditions each day?
- What if you only went long when the market was more likely to move up, or short when it was more likely to go down?
- What if you were able to stay away from the currency pairs that are more likely to whipsaw?
Well… you can.
You just need to do your own analysis. And I’m going to show you how I do mine.
How to do your Daily Analysis
The first thing that you need to do is to look at your daily charts (1D) and try to determine what it is likely to do.
Remember the market most of the time moves in swings: from one important level to the other (S&R levels). So if it was just rejected from an important level, it is likely to continue in the same way until it hits the next level.
That simple, if it was rejected from an important resistance level, it is likely to continue its way down until it hits the next support level, likewise, if it was rejected from an important support level, well, it is likely to continue its way up until it hits the next resistance level.
You see what I mean?
Sometimes it gets tricky though…
When the market trades near an important level, we need to be extra patient because we need to make sure the market has been rejected from an important LT S&R…
Remember that when we talk about LT S&R levels we are actually talking about zones. So we need to define this zone in the short term charts so we know exactly at what levels we can start looking for trade opportunities.
Here is an example to illustrate this let scenario.
As you can see, the EURAUD is trading near a LT support level around 1.5036:
By only looking at the long term chart it is very difficult to determine whether it has been already rejected from that level or not.
In other words, we dont know yet if we should start looking for trade opportunities here.
For that reason, we need to look at the short term charts and try to determine that zone so we know exactly at what level we should start looking for trade opportunities.
And that’s what we are going to do:
There you have it!
Now you can have a complete trading plan to trade the EURAUD.
- If it breaks the upper green level (resistance), it will trigger a bullish market condition and only long opportunities will be in play. And you’ll have around 500 pips before the market hits the next level.
- If it breaks the lower green level (support), it will trigger a bearish market condition, and only short opportunities will be in play. And you’ll have around 540 pips before the market hits the next LT level.
So you’ll have plenty of room to look for your trades.
Try to apply this methodology and you’ll see the results.
What do you think about the way I analyze the market to determine what currency pairs to trade?
Are you currently trading or looking to trade the EURAUD?
What other currency pairs are you trading?