GBP/JPY 4 hour time frame chart analysis

EUR/CAD 4 hour time frame chart analysis

If the logic goes you go

If the logic goes you go: If the reason you entered the trade disappears then so does your reason to remain in the trade. If you think you’re at a low and it breaks through, get out. Then reevaluate and decide once more.

Have a maximum run: If you have 4 or 5 bad trades in a row, take a break. Something isn’t working. Go away and regroup. Don’t be afraid to take a break.

Study: Learn new ideas, keep up to date, and don’t trade other people’s ideas. You should always know why you are in the trade.

Have Fun: Enjoy what you do. Keep calm and stay as unemotional as possible – you will be more successful.

Know why you are in the trade

Know why you are in the trade: Keep a trading log, and write down why you entered a trade. Don’t be impulsive. Have a plan. This way you will learn which strategies work for you in the long run and which don’t. If trading before or after releases works for you, look for them and trade those.

Trading - a game of probabilities

Trading - a game of probabilities: You will not be correct 100% of the time – it’s a fact. Good, experienced traders all know this. It’s a numbers game, and you’ll make some and lose some. The idea is simply to win more than you lose, not to catch all the fish in the pond. Understand that trading is a game of probabilities, and if you do the right thing, in the long run you will come out ahead. Learn from mistakes. When you start trading, you may well lose more than you make. Think about what you did wrong and try not to be emotional about the trades. If you stick to your game plan and learn, hopefully your profits will out weight your losses.

Understand the way the market thinks

Understand the way the market thinks: You should understand that all the information (except for newly released information which the market adjusts to within a short moment) is already built into the price of the cross. You should know what indicators are coming, particularly the majors, and you should know what is already anticipated by the market. There are many publications of market anticipation for major indicators.

Chasing a bad idea

Chasing a bad idea: This happens all the time. You see a potential trade and then decide to wait till the next day to see if it sets up. By the time you see that it did exactly what you thought, it may be too late. Review your reasoning for the trade, make sure your initial reason is still there and if not, forget about the trade. There will always be trading opportunities, so be patient and strike.

Averaging – don’t do it

Averaging – don’t do it: One of the most common mistakes traders make is the continuing adding of a losing position. Averaging will be the death of short-term trades. For short-term trades, preserving capital is the most important thing, and putting too much capital at risk will jeopardize success. In short-term trading, if a strategy is right the market should move in the correct direction within a relatively short period of time. However if it's wrong, the short-term traders should realize that they traded incorrectly, and they should take the loss and move on. There is not much room for pride in short-term trading. You should never add to a losing position.

Don’t fight the trend

Don’t fight the trend: Don’t try to buy on dips and sell on highs in a trending market. The old saying "the trend is your friend" is a good one. Why fight it – go with it!

Trending or Neutral

Trending or Neutral: Learn to analyze the market – is it a trending market or a neutral market? In a trending market, follow the trend. In a neutral market, buy on lows and sell on highs. As long as you use stop-losses you are controlling your risk.

Have adequate capital

Have adequate capital: You should never trade with money that you cannot afford to lose. Always make sure that you have enough credit. For example, you should can ask yourself the following question: “if I were to lose 50% of my opening balance in 6 months will I still be able to afford to trade?” Only if the answer is yes should you start trading. One of the keys to successful trading is mental independence, which means your trading freedom must not be influenced by your fear of losing.

Know your risk vs. reward ratio

Know your risk vs. reward ratio: The minimum ratio you should be using is 2:1, so if you are successful on 50% of your trades you are doing well. For instance, if you are long GBP/USD and you want to earn 30 pips you should not risk more than 15 pips. You should never risk 30 pips in order to make 10 pips. If you do, you’ll make a lot more successful deals then unsuccessful ones, but the poor ones will ruin any of your chances for profit. Your risk vs. reward analysis is extremely important to trading successfully.

Keep your position sizes within your limitations

Keep your position sizes within your limitations: Successful traders know that in order to profit you trade for the long term. Trading is a game of probabilities, and over the long run as long as you stick and implement sound strategies and stay consistent – success is much more likely to come. To be a successful trader you should never take a position that puts substantial capital in jeopardy. In actuality you will rarely find successful traders who risk more than 10% of their account in any trade. You might want to start small and increase your trade sizes as your confidence grows.

Don't be influenced

You have your own game plan stick to it. If you are influenced by others you will constantly be changing your mind. Learn to insulate external sources once you have made up your mind. You will always find someone who will give you a logical reason to do the opposite.

Let your profits run

Let your profits run: Do not be emotional about a trade – you will lose some and win some. Know the reason why you entered a trade and stick to those reasons. The less emotional you are the more successful you will be. Stick to your game plan – move your stop loss as the market moves in your favor and let your profits run. During times of extreme volatility it can be difficult or impossible to execute orders.

Set a Stop Loss

Set a Stop Loss: Before entering any trade, decide beforehand the amount you are willing to lose and stick to it. Set a stop loss on the trade before you enter. Do not fluctuate your stop loss if you are in a losing trade. During times of extreme volatility it can be difficult or impossible to execute orders. Stop orders become market orders when executed, so the order may not be filled at the desired price. As a result, the initial risk can be estimated, but not guaranteed.

Fibonacci Trading

Traders use the Fibonacci retracement levels as support and resistance levels.
Fibonacci retracement levels are 0.236, 0.382, 0.500, 0.618, 0.764

Since so many traders watch these same levels and place buy and sell orders on them to enter trades or place stops, the support and resistance levels become a self-fulfilling expectation.

Traders use the Fibonacci extension levels as profit taking levels.
Fibonacci extension levels are 0, 0.382, 0.618, 1.000, 1.382, 1.618

since so many traders are watching these levels and placing buy and sell orders to take profits, this tool usually works due self-fulfilling expectations.

In order to apply Fibonacci levels to your charts, you’ll need to identify Swing High and Swing Low points.
you can see explanation with video clip below here:

Leading and Lagging Indicators

Let’s discuss some concepts first. There are two types of indicators: leading and lagging.

A leading indicator gives a buy signal before the new trend or reversal occurs.

A lagging indicator gives a signal after the trend has started and basically informs you “hey buddy, pay attention, the trend has started, you’re missing the boat.”


Oscillators and Trend Following Indicators

1. Oscillators are leading indicators.--> I use Stochastic
2. Trend following or momentum indicators are lagging indicators.--> I use MACD

Below here is an example of chart template that including Sto-MACD indicator.

Follow the Trend

If you determine the trend, then follow it. Market trends come in a variety of terms - long-term, intermediate-term and short-term. The first thing you have to determine is what type of a trader are you, long term or day trader, that decision will determine which charts you should be using. For instance, if you're day trading, use the daily and intra-day charts, but always use the longer-range chart to determine the trend, and then use the shorter-term chart for timing. Make sure you trade in the direction of that trend and then buy on dips if the trend is up and sell on rallies if the trend is down.

Hidden Divergence

A hidden divergence is used as a possible sign for a trend continuation.

If price is making a lower high (LH), but the oscillator is making a higher high (HH), then you have hidden bearish divergence.



If price is making a higher low (HL), but the oscillator is making a lower low (LL), this is considered hidden bullish divergence.