Steps to Executing a FOREX Trade
Reality CheckClose your eyes; meditate on something else a few seconds. Then look at the chart one last time. Did you miss something? Did you see something that is not there? Was wishful thinking involved? If it checks out, go ahead and open the order palette and fill it in according to your analysis.
I also use a pre-trade checklist, which takes a last look at a number of other factors to make sure I am in line with my profile and process. For now you want to just make sure you have the right pair, the right quantity, and are hitting the right buy or sell button.
Enter the TradeI use the dagger entry principle to enter markets.
Tip: The only time I change either my S/L or T/P is when pending news relevant to a currency in that pair is imminent. If my S/L is a long ways away, I may move it in closer. If my T/P is close, I may go ahead and take the profit.
Monitor the TradeWhat I am mostly looking for here is a price point at which I can raise my S/L to break even or close. Then, I sit on my hands. Once a stop has been placed I never move it back down or back up except as noted earlier. Instead of watching over the trade -- I made my decision and now I must live with it -- I spend my time looking for more candidate trades.
Tip: "Sit on your hands, Dad, sit on your hands" -- Charles B. Goodman.
In The Proactive Trader, I demonstrate the line technique, which makes sitting on your hands easier to do. Surprisingly, I have found it to be one of the most difficult techniques for many of my students.
Exit the TradeNo matter what your trading method -- when prices move significantly in your direction, move your S/L to a breakeven price or close to it.
Either the stop-loss (S/L) or take-profit (T/P) is elected.
If your S/L is not hit, you are simply waiting for prices to move in your direction enough to move the stop-loss to breakeven. A successful trade should be thought of as two steps, breaking even and then making money from the T/P. In between, there is not much to do but wait. Use your time to explore other candidates.
Tip: Breaking even counts in the winning column of your ledger; ties here go to the runner. You have at least lived to see another trade -- and gained more time to learn the markets.
By Michael Duane Archer