Thursday, April 23, 2015

The Candlestick Watcher

Intra-day trading in the foreign exchange market will make you a candlestick watcher. That is the nature of the game. The more you are in front of a chart; the more trading opportunities will present themselves. The amount of time spent on candlestick watching will also depend on which chart timeframe you primarily base your trading decisions from. This is a personal preference.
Let’s say you have identified a high probability trade and you enter a “parent and contingent” order (market order with preset stop and limit) according to your plan. Once a position has been taken it will have to be managed in order to maximize profits and control losses under an ever-changing market environment. Most forex traders will manage positions live in front of the computer (as I do) and closely watch the candlestick and chart patterns develop.
You should have an intimate knowledge of all resistance and support levels where you expect the market to vacillate, or possibly change direction, and you should also know exactly where your stop and profit taking levels are relative to the current market price.
The true test of your emotions will come when the market takes your position above and below your entry level. As you closely watch the candlesticks, expect the market to take the position through your entry level any given number of times before it decides on a direction. The market passing through your entry level will be a true test of whether or not you are focusing on the game/task and may entice unwanted behaviors if you allow it.
If you are focusing on the equity, then the market movement above and below your entry will drive you crazy and probably force you to take small profits, to avoid a loss, on what would have been a perfectly well executed trade. If you are focused on the task, then the market passing through your entry will only be a test of mettle while trying to capitalize on the opportunity the trade has presented to you.

1 comment:

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