Preparing for the Trade
Attacking currency trends successfully is all about having a firm foundation that includes a mission statement and a game plan. Secondary to having those, you need rules and tools in place to support your mission statement and game plan. It is about understanding what the market is telling you. Is the market trending or nontrending, and what do those things mean? How do corrections fit in the picture? How can you benefit when a market corrects? How do you enter or exit a trade and why? What do you look for when the trade blotter is blank?
Clues to help answer these questions have already been presented throughout the book. In the next two chapters, we'll bring the pieces together. How do the three charts—five-minute, hourly, and daily—work and complement each other? How do the three tools—100 and 200 bar MAs, trend lines, and Fibonacci retracements—work and complement each other? How do we define risk and manage trades along the way? How do we dance the dance of a trend trade? Along the trend journey, I will show what signals to look for, what the good entry points are, how to manage the trade, what the good exit points are, and when it's a good time to reestablish a trade.
There is no set step-by-step process for how a trade may progress from start to finish. The markets are simply not that consistent, nor static. What is most consistent in trading currencies is that the focus should be on controlling and defining risk. Understanding risk is ...