The four questions every forex beginner must ask himself before taking a trade - forex trading demo software india

The four questions every forex beginner must ask himself before taking a trade ~ forex trading demo software india

If you have been trading profitably this will not be news to you. There are four questions which if all answered in the affirmative will ensure the preservation of your trading capital. I started off with a very small account- micro, and did not enjoy the luxury of margin of error in those first weeks so I often stress the need for capital preservation. The problem with small forex accounts is that you cannot afford to be wrong for a couple of times in a row.
The habit of asking myself these four questions for every trade I take was cultivated by the vow I had made when I had just started trading never to refinance my account again. They are now part of my old trading habits which I would not want to see dye away. These four questions do not require you to overhaul your trading strategy. As a matter of fact it is just about incorporating them into your current style of trading.

The first question I ask myself is- is there a trend? Trend in this perspective does not mean movements in the lower timeframes like the 5 minute or 15 minute chart. Trend refers to a biased directional move of a currency for a couple of days. That implies that I am more into the daily chart in determining the trend of a currency pair.

Once I have determined whether the trend is up or down, my next question is always- is there a reversal pattern. The reversal pattern will only be confirmed at the close of each trading day. For an uptrend I will be looking for a bearish reversal pattern. For a downtrend I will be looking for a bullish reversal pattern. There are dozens of bullish and bearish reversal patterns which are only familiar to those who have mastered candlesticks. To constitute a complete reversal pattern, candlesticks will be single, double or triple reversal confirmations.

The next question is always this- is the reversal pattern forming at a key market level? A bearish confirmation is only relevant if the reversal signal forms at an area of resistance. On the other hand, a bullish confirmation is only relevant if the reversal signal forms at an area of support. The reason I insist on a support or resistance zone is because more often than note a trend is not complete until a support or resistance zone is reached and any reversal patterns that form before then are nothing but traps intended to lure the unsuspecting traders.

The last question is equally important. Is there a nice risk reward? It is not enough that there is a trend, and the trend has been followed by a reversal pattern in a resistance or support zone, the trade must have a nice risk reward. A nice risk reward is where your reward if any far outstrips your risk in the trade you intend to take. If every other thing is present but the risk reward is still bad, I will not take the trade.

The four questions must all be answered in the affirmative. A negative on one of those questions invalidates the trade and I must wait for another day or peruse a different currency pair. These four questions can help any struggling trader and increase their portfolio at a faster rate. If you can memorize them before your next trade it will be good. If you cant it will be ideal thing to just write them down and create a check box to use in your next trade. Remember, that all the four questions must be answered in the affirmative.

Read: How price action traders can benefit from VSA Indicator
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