Hey trader, did you trade the Non-farm Payrolls report?
Its been a while since the last time I saw the NFP report having a large impact in the market. Could it be that the market conditions are different now?
For instance, most traders think this report (NFP) is the most important one, but in the last couple of years, I have noticed the FOMC statement has had the most impact of all fundamentals, including the NFP report…
Do you agree with me?
Or have you noticed something different?
Anyway… Please share your thoughts in the comment section!
Now, on to my strategy…
I’ll share my strategy with you
Look, I’ve been sharing my analysis with you for quite a long time now, and I’ve been doing it because I wanted to help you make better trading decisions.
So my main goals has always been to help you and other traders gain a better understanding of how the market moves, and how to take advantage of it!
And yesterday I was thinking about going for the extra mile, why not share with you exactly the way I trade, the way I look for my trades so you can apply what you have learned here, in other pairs, or even other markets.
It’s impossible to share with you everything in just one article, but over the following posts, I’ll be sharing every aspect of my system, so you can take advantage of it!
So please, if you have any question, don’t hesitate to comment below this article.
Here are some important aspects of my strategy!
These aspects are the foundation of the system, so you need to understand them in order to take advantage of the strategy. I meant it, please go through them several times over, and if you have any question, please comment.
1. The market moves from one level to the other.
That’s right trader, when you look at the long term charts (1D, 1W or 4H), most of the times, the market moves from one level to the other.
That means that, if the market gets rejected from an important support level, it is likely to continue its way up, at least until it reaches the next resistance level. Or if it breaks through an important resistance level, it is likely to continue its way up, at least until it reaches its next LT resistance level.
Those two scenarios are what I call a bullish condition, meaning that I’ll only look for long opportunities (and avoid very short signal).
Likewise, if the market gets rejected from an important resistance level or breaks through an important support level, it is likely to continue its way down, at least until it reaches its next LT support level.
And that’s what I call a bearish condition, and only short opportunities will be in play.
When the market moves from one level to the other, its what we call a market swing.
2. Technical indicators and magical formulas are useless
Please dont take this personally, but I think all technical indicators, such as: RSI, MACD, Stochastics, Bollinger bands, etc. or magical formulas such as Fibonacci, Elliot Waves, Gann, etc. are USELESS.
Look trader, its all about the way you use those technical indicators and magical formulas, if you are using the as your entry signal, you are doing it wrong!
All technical indicators use past data to calculate its final figure, that means that they have a lagging factor, which means that if you use them to take your trades, you are going to get in late! When the move already happen! So please, avoid using them as your trigger signal.
Now, magical formulas, do you really think there is formula that knows exactly at what level the market is going to retrace every single time? On every single market? On every single instrument? If you do… mmmmm… maybe you should be doing something else…
It just doesn’t makes sense to me, and I always like to do the things that makes perfect sense.
3. You dont need to trade every day
Our goal as traders is to make money, not to trade everyday. Please remember that.
I know sometimes its difficult to be looking at your charts without taking any trade. But that’s just how it is!
So if this is your case, I have a piece of advice for you, look at your charts in the morning, if you dont see something worth it, take the day off, go out and do something else: spend time with your loved ones, go see a movie, do some exercise, learn to play an instrument, etc. It’s going to be a lot cheaper than try to trade something that has no clarity.
At the end, we need to find every day the instruments that have clarity, the ones that have great profit potential, the ones that you feel comfortable with, but if you find none, well, then trade none of them.
4. About long term and short term charts.
It’s not enough to have clarity on the long term charts or in the short term charts alone.
In order to trade something, you need to have clarity on both time frames.
Long term charts: I use the long term charts to determine what is likely to happen next, what direction am I going to trade and until when.
Short term charts: I use the short term charts to determine the right time to get into the trade, and where to set my stop loss levels.
When you get that clarity on both time frames, that’s it! Its time to trade it!
5. About fundamentals releases
5 or 6 years ago it made sense to trade based on fundamentals announcements, but those years are long gone.
Back on those days the market moved hundreds of pips in one direction, in just a few minutes, so it made sense to use the straddle technique (set two orders, one above – to go long, and the other one below – to go short, market action).
These days, the market moves up, then down, and it ends up where it all started, so if you use the straddle technique, you’ll end up with two trades, a buy and a sell, and both of them in a loss. Go figure.
So I understand that sometimes you need to hold my trades over these announcement so they can reach my take profit order, but I have a simple rule, if I dont have at least 80 pips on my favor, I just close my trade if there is an important announcements. (like what happened with my GBPAUD trade).
6. Focus only on liquid instruments
The strategy that I use takes volume as one of its most important variables.
So what ever the instrument you are going to trade, please make sure you trade the most liquid ones.
For instance, if you are focusing on Forex, you need to trade only the majors and its crosses and avoid trading the others (MXN, TRY, INR, etc).
If you are trading stocks, focus on the most traded stocks, and avoid trading small cap stocks and the like.
If you are trading commodities, trade the most liquid ones, and avoid trading the ones that are barely traded.
The reason behind this is that when you trade the most liquid ones, its very difficult to have one influencer or one agent to have a large impact in the market.
7. Avoid trading only one or two instruments
When we are new to trading, we tend to focus only on one or two instruments, and its alright, but only at the beginning stages of our trading career, when we are learning.
If we keep trading just one instrument, we are going to force ourselves to sometimes trade something that is untradable, something that has no clarity, but we are going to trade it because that’s just the instrument that we are suppose to trade…
Once we are more experienced, we need to add more instruments, we need to diversify and increase our chances by expanding our horizon to other instruments that perhaps have greater profit potential.
What do you think about these principles?
Do you have something else that you think I need to add here?
I’ll keep adding some more in my next post, so speak out if you are thinking about something!
Share your thoughts.