The Sensible Guide to Forex: Safer, Smarter Ways to Survive and Prosper from the Start

CHAPTER 7

Pulling It All Together with Trade Examples

Congratulations; at this stage you've already seen the basics.

Now it's time to pull together some of what we've covered thus far and apply it in real-life trades.

In this chapter we'll:

• Review the steps to identifying and executing low-risk, high potential yield trades.
• Introduce some of the common types or styles of trades.
• Apply these ideas in a few real-life trades from my personal trading journal.

IDENTIFYING AND EXECUTING LOW-RISK, HIGH POTENTIAL YIELD TRADES

You should be trading from daily, weekly, or monthly charts for all the reasons we mentioned earlier in Chapter 3, particularly because indicators and trends are more reliable and stable in these time frames. That means your likely holding period will be days, weeks, or months.

Begin Your Search On Longer Time Frame Charts, Then Zoom In

Here's the basic idea behind how we locate simple, low-risk, high potential trades. Start your search for low-risk trades by scanning charts with time frames that are 4 to 5 times longer than the time frame from which you intend to trade. The first goal is to find low-risk entry points by identifying the long established, and therefore most reliable, s/r areas, because they're where the risk of opening a position is lowest. Here's why.

If price breaches long-term strong support, that's a clear signal that price is moving decisively against you. By entering close to strong support, you can also set your stop loss order relatively ...