Rick Wright
Online Trading Academy
Hello traders! This week’s newsletter comes to you from chilly Durango, Colorado where I’ll be hanging out for the next month or so, before my next class. Our topic this week is the need to have flexibility in your trading plan based on market conditions.
So, by now you may have heard that we consider a trading plan to be one of the most important factors in a trader’s success; but having the discipline to follow the plan is just as important! Helping with your discipline/psychology is Dr. Woody Johnson’s specialty. Here, I’ll show you an adjustment you can make to your trading plan involving timeframes that can offer a few more trading opportunities.
Different Timeframes Offer Different Opportunities
First of all, we must understand that the market moves in 3 directions: up, down and sideways. However, depending on what timeframe you use to make trading decisions, at any one time different traders will have different views of the market.
An example would be to look at the monthly chart for the EURUSD from December 2016 to April 2017. This time period is clearly a sideways market.
When dropping down to a 4-hour chart, these few months have some very clear up and downtrends to trade.
When looking at a 4-hour chart on the EURUSD from late November 28 to early December 20, we have a clear sideways trend.
When moving down to a 30-minute chart on this same period of time, there are a couple of relatively easy trades inside this smaller timeframe from up and downtrends. There are thousands of examples like these on the charts, I encourage you to go find a few on your own!
Here at Online Trading Academy, we usually use 3 timeframes for our trading: the largest is for defining where the large institutions are placing their buy (demand) and sell (supply) orders. Our next timeframe down is for defining the trend in between those larger supply and demand zones, and the smallest timeframe is where we time our entries to engage in the trend. So, what should we do when the trend isn’t clear?
The answer should be a bit obvious: change the time frames you are trading on! For example, if a weekly/daily/four-hour chart system isn’t easy to pick trades from, go down to the next series of times lower. Daily/four-hour/one-hour. And if that isn’t clear? Four-hour/one-hour/15 minute. This way your STRATEGY remains the same, just your timeframes change.
Personally, I prefer longer timeframes as the amount of time spent looking at charts is much less. Imagine using a 10 minute/2 minute/30 second strategy! A lot of time would be spent staring at the screen trying to squeeze out a handful of pips. One of the more memorable phrases in the world of trading is, “We get paid on the quality of our trades, not the quantity.” Would you rather do 4 trades a week to get 100 pips, or 400 trades a week to get 150 pips? I certainly don’t mind giving up a few pips to significantly decrease the amount of time I have to spend looking at charts!
The entire point of this article is to express the need for having a trading plan, yet also having the flexibility of adjusting a part of your plan based on market conditions, on occasion. This is where discipline comes into play. Having patience and waiting on trades that fit your plan is many times the right move. After all, if you are adjusting your timeframes every other trade, do you really have a complete trade plan to begin with? However, if the market really isn’t offering you any opportunities in your preferred timeframe, then this slight adjustment might be just what you need.
Read the original article here - Your Flexible Trading Plan
This content is intended to provide educational information only. This information should not be construed as individual or customized legal, tax, financial or investment services. As each individual's situation is unique, a qualified professional should be consulted before making legal, tax, financial and investment decisions. The educational information provided in this article does not comprise any course or a part of any course that may be used as an educational credit for any certification purpose and will not prepare any User to be accredited for any licenses in any industry and will not prepare any User to get a job. Reproduced by permission from OTAcademy.com click here for Terms of Use: https://www.otacademy.com/about/terms
Editors’ Picks
EUR/USD hits two-day highs near 1.1820
EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.
GBP/USD reclaims 1.3600 and above
GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.
USD/JPY drops back below 157.00, as focus shifts to Japan snap election
USD/JPY is back in the red below 157.00 in the Asian session on Friday. The Japanese Yen recovers ground against the US Dollar amid some profit-taking ahead of Japan's snap general election on Sunday. The preliminary reading of the Michigan Consumer Sentiment Index report for February will be released later on Friday.
Editors’ Picks
EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates Premium
The EUR/USD pair lost additional ground in the first week of February, settling at around 1.1820. The reversal lost momentum after the pair peaked at 1.2082 in January, its highest since mid-2021.
Gold: Volatility persists in commodity space Premium
After losing more than 8% to end the previous week, Gold (XAU/USD) remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000.
GBP/USD: Pound Sterling tests key support ahead of a big week Premium
The Pound Sterling (GBP) changed course against the US Dollar (USD), with GBP/USD giving up nearly 200 pips in a dramatic correction.
Bitcoin: The worst may be behind us
Bitcoin (BTC) price recovers slightly, trading at $65,000 at the time of writing on Friday, after reaching a low of $60,000 during the early Asian trading session. The Crypto King remained under pressure so far this week, posting three consecutive weeks of losses exceeding 30%.
Three scenarios for Japanese Yen ahead of snap election Premium
The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
I’m often mystified in my educational forex articles why so many traders struggle to make consistent money out of forex trading. The answer has more to do with what they don’t know than what they do know. After working in investment banks for 20 years many of which were as a Chief trader its second knowledge how to extract cash out of the market.
5 Forex News Events You Need To Know
In the fast moving world of currency markets where huge moves can seemingly come from nowhere, it is extremely important for new traders to learn about the various economic indicators and forex news events and releases that shape the markets. Indeed, quickly getting a handle on which data to look out for, what it means, and how to trade it can see new traders quickly become far more profitable and sets up the road to long term success.
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and selling pressure. Chart patterns have a proven track-record, and traders use them to identify continuation or reversal signals, to open positions and identify price targets.
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.
The challenge: Timing the market and trader psychology
Successful trading often comes down to timing – entering and exiting trades at the right moments. Yet timing the market is notoriously difficult, largely because human psychology can derail even the best plans. Two powerful emotions in particular – fear and greed – tend to drive trading decisions off course.