Walk Through To Cut Losses & Trade Selection

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At the time of writing, I have been talking for weeks about my favourite trades in GBPAUD 1H. So how and why do we pick what to trade? The best traders in the world use tools for trade selection. That is all we are doing. 

1. Our goal is to make sure we have winners, and profitable trades. We greatly increase our chances of success by ensuring a little preparation. Whilst you can use the indicator on any pair and time-frame because the underlying principle of momentum and multiple indicators, across multiple time-frames and price confirmation obviously holds true, you can also increase your chances of success with a little prep.

2. Although I find the 1H and major v minor or minor v minor the easiest to find smooth trends, actually the ultimate skill to pick up with the help of the indicator is spotting smoothly trending pairs with long enough trends which are being consistently picked up by the indicator.ie the market is simply not wrong-footing us. 

Take the image below. After a period of being wrong-footed, where we can see the market is ambushing us (leading into trades, only to reverse, we obviously wait until we get smoother trends being caught by the indicator. As soon as we get one, then we can with more confidence enter the next trade, and the next, and the next, and the next...

(see also: https://pipspredator.zendesk.com/hc/en-us/articles/115003114385 and also https://pipspredator.zendesk.com/hc/en-us/articles/115003142309 )

 

 And the next day we see the continuation of strength, unsurprisingly...

And let's take this education one step further by looking at all the 16 windows I used in a recent webinar - the good, the bad and the ugly trades.

So let's go through each one in turn and analyse it in a sensible walkthrough, step by step, so you get inside the mind of a trader.

EURGBP: Been going sideways but all the arrow aligned. So I am a cautious long. 

NZDJPY : We picked up a good trend up, so the short trade were willing to take. But it's moving sideways now. No shame in exiting early and moving on, or re-enter when it goes back below the entry again. Equally, if you are not a screen watcher, it's a case of setting the stop loss and letting it take you out (trailing stop) or if you want to be cautious then make the Add your take profit, limit order at the time you set your initial short order.

XAUUSD: Easy trade to enter and you can see why - smooth trends and all arrows also pointing down (not essential, but builds confidence).

USDJPY - Smooth trends, although one of the early trades got us wrong-footed, but all good since.

EURUSD Weekly - a longer term short trade. Good hedge against short-term EUR and USD trades.Good thing is we know our stop loss and our 'take profit'/add positions.

GBPCAD M30 - this is a great one to show the different ways to do a trade and the benefits and flexibility of our approach.

If you are not going to be in front of the screen then you just have your trailing stop loss and/or your limit order (take profit) if a beginner to take you out. If you are advanced, you ADD at the dotted line. 

But if you are going to screen watch, you would use the 'x' to exit - and then re-enter as the price moves below the short entry line again.

GBPUSD Daily - pretty self-explanatory and very profitable. 

GBPJPY H4: Again very good, smooth trends in place. Easy to read. 

EURCHF: not a strong profit, now meandering. Again you would be forgiven for cutting and running with the smaller profits because the trade is meandering.

NZDCAD H1 Just a serious of smooth wins after being wrong-footed. 

ZARJPY M30

Great example of leave it alone. Keeps being wrong-footed, ie trends do not last. Find an easier trade.

NZDUSD H1

This is a tough one because some trades caught the trend and a couple got wrong-footed, so you would have some traders looking for easier trades.

AUDCAD M15: After some big profitable shorts, many traders would be afraid of taking the long signal, whilst other would see that as an obvious trade. If you are not confident, you don't have to do it. 

EURNZD 4H: After 2 small losses (that's fine, and wouldn't worry about them stopping you doing a trade) we make lots on the long trade. The short has run out of steam, and you can decide to cut and run if you want to use the trading capital elsewhere in a greater odds trade, or keep to your original trade goals. 

EURSEK M30: Great example of a profitable, but range bound trade. Clearly you are just not catching the trend, and it is more than acceptable to take the money and run.