The most
important aspect of trading is the mental state. Unfortunately many of the traders
focus them efforts on searching for a foolproof method or strategy: Moving
averages crosses, RSI, Momentum, etc. Some pass the time asking to others: Where goes the trend? Did you go long or
short? Bernanke have announcement today? Is it a breakout? Still others seek
answers regarding the Price direction, Reading or listening popular traders,
about the opinion of where the market goes. All this information will only take
you more confusing and complicated than it really can be. Taking a loss is
something that really bothers you, take five consecutive losing trades can be
very daunting, and manages to destabilize our mental state. On the other hand,
achieving a reward for reckless action is one of the most expensive mistakes in
this business. In my point of view, it must change the “You overshoot” or
“Successful achievement” to “be highly probable and the risk are low” In the
other words: to control your losses. Be realistic, you cannot control the
prices, so, the only thing you can control is… yourself. How? Being disciplined is the answer. Some of
you will say: Yeah Octavio, but what is the trend in Eur/Usd? Where do you
predict the Price goes? I just answer: I don’t know dude, I do not make predictions,
but dude; you asking to the wrong person, ask that to a psychic or an astrologer,
with magic, witchcraft and astrology are obscure things and I tend toward the
scientific.
The following graphic shows how
business AB = CD pattern
buying the EUR /
GBP. The first is to identify the
points A and B evaluate
if the point C that
can meet a harmonic number, in this case 61.8% Fibonacci
retracement.
But I do not understand. How exactly do you do Octavio?
Ok, it is best to explain it in steps (never found someone to describe how to act and to identify opportunities, therefore, I explain here, waiting to be useful).
Step One: Find the AB = CD pattern, find this form of bolt ray. In this particular case see the price coming down surpassing 0.8708; just look at it began to show the buying opportunity, I will explain briefly why:
Ok, it is best to explain it in steps (never found someone to describe how to act and to identify opportunities, therefore, I explain here, waiting to be useful).
Step One: Find the AB = CD pattern, find this form of bolt ray. In this particular case see the price coming down surpassing 0.8708; just look at it began to show the buying opportunity, I will explain briefly why:
a) Many traders, executed sell
orders for reasons such as: He
broke the support line: sell,
sell because it is strong.
b) The stochastic indicator shows a sell signal (time before
this can be obvious, but that cannot see in the image above)
c) The trend is your friend and they entry short.
d) They make a basic mistake ... they are selling cheap,
and by my side, I buy low and sell high.
The ideal in this AB = CD pattern
is to have the
same number of candles on AB
and CD, however, in this particular case;
CD has fewer candles compared to AB. Right
here is necessary to emphasize a
very important aspect. The market is not perfect, so do not expect to find
the perfect pattern.
The second
step is: Place the Fibonacci tool and
identify retracements with the harmonic numbers. In the graph above, you can look 61.8% the number
right at the point C.
Step Three:
Assess the level of D. That is, where is the
potential for reverse zone?
Step Four: Identify if there is an area of demand to support our thesis (just the yellow paint area)
Step Five: Define where put our entry
Step Four: Identify if there is an area of demand to support our thesis (just the yellow paint area)
Step Five: Define where put our entry
Step Six: Evaluate where put our stop loss, just
where we identified our pattern can fails.
Step 7: If the risk is good, executed our order as we planned.
Step 7: If the risk is good, executed our order as we planned.
In the chart above you can see the reversal area: 127.2% which is a harmonic
number. It also shows the area where I planned to take profits or set my limit
order.
Step Eight: Check the position, wait for 20 pips or more and move the stop-loss
order to break even (this is highly recommended for beginners, I personally
determined when is the right time to move my stop-loss order, and always in the
direction of my trade).
The step nine is: The closing of the position; this one can be manually,
using criteria such as time, i.e., the time when the markets are not opened, or
the Friday before weekend. The ideal purpose is to close the position with stop-loss
or limit order.
Step # 10: Evaluate and review: Why I won? And why I lose? That is, take the necessary notes. Remember that something very valuable is the experience.
Step # 10: Evaluate and review: Why I won? And why I lose? That is, take the necessary notes. Remember that something very valuable is the experience.
