In this article we will present three important forex trading guidelines to turn your trades into winners. The three guidelines: trend, current momentum, and price targets are simple to understand, and once fully understood, can be easily implemented into your forex trading strategies. We are confident that trading accuracy and confidence will increase dramatically in a matter of just a few trades with the information in this article.
Forex Trading Guideline Number 1:
All traders must identify if the pair they are trading is trending on the higher time frames, H4 and larger. If a currency pair is in an uptrend on the H4, D1 or W1 time frame then it is a good candidate for a buy or sell entry.
Here is an example of a currency pair that is trending on the higher time frames, in this case the pair is trending up on the D1 time frame and is a candidate for a buy. Notice that is has been trending up for several days. If you catch a pair early in the D1 trend cycle you can ride the trend until it stalls and you can collect more pips by letting the trend do the work. If a currency pair is not trending on the higher time frames and you enter the trade anyway, you are daytrading.
Here is a link to our forex trend indicators for 9 time frames and 28 pairs total. Traders can set them up one any pair you like, but we suggest setting them up by individual currency, or you can use our high powered chart setup and view multiple pairs at once with the same common currency.
Forex Trading Guideline Number 2:
When you enter a trade you must make sure the pair you are buying or selling has lots of momentum at the point of entry. On buy trades you want lots of momentum going up. On sell trades you want lots of downward momentum at the point of entry. Currency pairs only move because one currency is strong and the other is weak or both and that is the only reason. For successful forex trades you can use a strength and momentum indicator for live signals like the one below:
Look at the example above. The live momentum indicator shows consistent NZD strength on all of the NZD pairs. The EUR/NZD had a nice drop with good momentum as shown on the price chart. The EUR/NZD dropped about 100 pips in one trading session. Several hundred pips of movement combined in one trading session, so this is significant. Trading forex with a premium live momentum indicator allows traders to move their stop to breakeven. Then you can check the higher time fames to see if the pair is trending for more trend based pips over the next few days, possibly longer. The above example is for the NZD pairs, however the same strategy works for 8 currencies going in two directions.
We also have a chart setup that will allow traders the ability to see the movements of all 7 pairs in any currency group. If you set up your charts using the metatrader profiles you can see all of the NZD pairs on one screen and more than likely trade several NZD pairs in the same trading session. This excellent chart setup can be used on 8 currencies with easy navigation using the hotkeys on your keyboard.
Forex Trading Guideline Number 3:
Setting price targets at critical areas of support or resistance are important for any forex trade. If you sell a pair you must know when to take all profit or at least some profit to increase your account equity, while providing you with risk free upside potential on the remaining lots.
Look at the example above. The breakout point 0f 0.7325 is clear on the D1 time frame. You can set an audible price alert at that point to monitor for a price breakout. When the alert hits you can go to the momentum indicator to verify your entry. Your price target of 0.7700 is knows and identified in the chart analysis. This is a pip potential of 375 pips, not bad at all ! A good example of why working with the higher time frames is best. This is just one example, we also have many more examples of setting price targets using the higher time frames.
Add Money Management To These Guidelines
If you use these 3 guidelines consistently you will be creating a fantastic forex trading system. So adding a few money management guidelines will be an improvement. Always trade with a stop order, then move your stop order to breakeven when you obtain a reasonable profit. We have more specific forex money management procedures to make your guidelines work better with much lower risk that other forex trading systems.
If You Only Need Three Guidelines Why Do Traders Fail?
Forex traders are consumed by and engulfed in technical indicators. Technical indicators are attached to pairs, not individual currencies, which is a terrible flaw. You are trading currencies, not indicators, so we suggest starying away from technical indicators. There are about 150 standard technical indicators and about 50 different candlestick chart formations, and none of them work at all, because they are attached to pairs, not individual currencies. Standard technical indicators like Fibonacci, RSI, envelopes, etc. take over your mindset and cause months and years of frustration. Currency pairs are two instruments and each one should be examined before trade entry. Momentum is created when one currency is strong and the other is neutral or weak.
Conclusions about our three forex trading guidelines: If currency traders move away from standard technical indicators and towards individual currency analysis, their results will improve substantially. Incorporating other things like trading with the trend, current momentum and some basic money management rules will also improve their trading results as they press forward into more profitable trading.