Most of the time, failure to get the right systems or processes to make a trading decision is the biggest challenge for traders in order for them to make profit in forex trading. This knowledge is crucial and I really concern about it.
I have gone through a lot of experiences as an individual investor as well as a mentor in this forex sphere and now is my turn to share it with all of you. This article may be quite lengthy since it is occupied with beneficial information exclusively for the traders or retail investors.
With that, you may trade confidently and minimize the loss potential in future. Therefore, please take it seriously to avoid any regret later.
Without following a proper process or system in this trading, the traders will trade blindly and proceed to BUY or SELL as they please without any tangible purpose.
This is actually an act of gambling because you just let the fate decide for you. Thus, instead of become more profitable, you will continuously face a massive loss just because of not following the right standard of procedure or the right guideline when is the appropriate time to click the BUY or SELL button.
For this article, I would like to share with you the 3 most important elements that you should know and aware before you click the BUY or SELL button.
So, try to understand and comprehend the content very well and benefit from it.
3 CRUCIAL ELEMENTS THAT WE SHOULD KNOW BEFORECLICKTHE “BUY” OR “SELL”BUTTON.
1) What kind of pair should we trade？
2) When is the best time to trade the pair？
3) Where is the best place to trade the pair？
These three elements is the primary guideline for us to develop a standard of practice (S.O.P) or a comprehensive process that enables us to make an informed trade decisions.
Now, let's take a look at the content of these elements listed above.
WHAT KIND OF PAIR SHOULD WETRADE？
Dear traders, please bare in your mind that not all currency pairs are possible for you to trade at once. Been in this arena for 12 years as a mentor, I found that majority of the traders who come to my class go for unrealistic targets in choosing their pair.
In other words, those traders will eventually choose the pairs which are ready in front of the screen to enter the market right after they log in to their account. The trade was carried out without analyzing and filtering the pairs.
Here, I would like to emphasize the first thing you should evaluate before you proceed with analysis is to filter the pair. Filtration is based on two aspects:
DAILY TRADING RANGE(DTR)
Daily trade range is the “daily average movement” of a currency. DTR is a measurement to see how far a currency pair is able to move within a day.
The DTR‘s movement for each currency pair is usually not very far apart. A close movement is common for DTR. For example, if the pair moves at 50 pips for today, we can observe that the DTR’s movement moved at the range of 50 pips as well on the previous day.
It is atypical for DTRs movement to change drastically such as from 50 pips to 200 pips. You may observe it on the MT4 graph. Surely, you must be see that each of pair will move at almost the same DTR every day.
DTRs movement is divided into three categories:
Slow DTR: 0 to 100 pips
Medium DTR: 100 to 200 pips
Speed DTR: 200 to 300 pips
SO, WHAT IS THE USE OF ‘DTR’？
The Daily Trading Range assists us to choose the right target of pair. Remember this, an excellent trader may immensely improve his trading performance and avoid the loss by understanding the daily trading range and its impact on currencies.
Nevertheless, in order to understand this, it demands our commitment, capital, skills and experience in trading.
For instance, if you are a new trader with a small capital to invest into the markets, you should choose a lower pair of DTRs that range from 0 to 100 pips.
A pair with low risk of loss will fits the new trader better. Until you are confident enough to invest more, then you may choose the advance DTR consecutively. This non aggressive movement will give the new traders an opportunity to feel the excitement in the market later.
HOW TO KNOW THE DTRSMOVEMENT？
It is very easy. Just follow these steps:
Open the graph on TFH1 (there must be reason why it must be H1) Click “CTRL + Y” and a line divider which indicates the day will appear. Measure the HIGH to LOW points on each of day divider.
Repeat the measurement at least 2 days in the same week and the other 2 more days in the previous week.
Evaluate the average of the measurement. You will get the DTRs interpretation.
The DTRs interpretation will not always be the same. Sometimes, it changes in accordance with the season. But, the change is usually not drastic.
As for now, this is what I intend to share with you. Definitely, there is a lot of things that I want to share with you, but I am afraid that you will get trouble to comprehend the content. Learn one at a time will strengthen your understanding.
Later, I will continue to share about the SECOND and THIRD element in the next article.
I advise you to practice the content while trading and never take this article for granted.
Here, I would like to end this witting with a beautiful quote from Confucius, “Knowledge without practice is useless. Practice without knowledge is dangerous”.
Autuor – Nazri Naz
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