The Mindset of a successful trader

THE MINDSET OF A SUCCESSFUL TRADER!
For those of us who have been following this thread for quite a while, you should have by now been in a position where you take trades with confidence. That notwithstanding, I will today discuss the following specific steps on how to think and act to develop the mindset of a successful forex trader for ease of reference:

Step 1: Trade the Masterchart. It should be your No. 1 guide. The levels on the Masterchats I posted here are products of extensive research. What is happening in the forex market is that series of bad/good news (fundamental), manipulation/greed by the big players and most times fear/panic will always push the price from one support/resistance level to another. The truth of the matter is that the world economy generally is in shambles that is you will constantly see series of bad economic news followed by some good news resulting in “bull+bear+bull+bear” usually repeated over and over again.

Step 2: Trade in the direction of the weekly chart: The most reliable direction in the forex is the direction of the weekly. If the weekly is in a bear/bull mode it could stay that way for 4-10 weeks. Read the post on understanding trend to better understand this.

Step 3: The best trading opportunities are in the weekly: To increase your chance of success, sell only the top of nN, mM and buy around the base of V, U and W on the weekly charts. To identify these level signs, open a weekly chart, look closely and you will begin to recognize them. This simple trick will make your trade live a lot easier. I will begin to post this signs here

Step 4: Use money management: Use my recommended money management lots/account size ratio as follows:

0.01 lot for $1000 Trading account (max of 5 open trades at the same time)
0.10 lots for $10000 trading account (max of 5 open trades at the same time trades), etc

If you gather more experience or make money regularly, you can gradually increase your lot sizes or open trade to double the recommended lot sizes.

Go through the early part of this thread for a better understanding of my views of money management.

Step 5: Trade 1000+ Pips circle. Read and understand the 1000 pips price actions analysis. For the major pairs from the pin of a weekly candle expect 1000 and more before any major reversal. If the destination of 1000 pips PAA is closer to a major support/resistance on the master chart anticipate a touch of that level. Identifies expected levels in advance and you only monitor price reaction around such areas.

Step 6: Avoid think in terms of pips. Avoid thinking in terms of pips but in terms of actual currencies e.g. cent, pence, etc. If you think this you will avoid the graveyard of most forex traders (i.e. chasing low pips (5-100). If you think in terms of currency you will realize that a move 1000 pips move by GBPUSD move from 1.54000 to 1.64000 is a mere 10 cents. Further a 1000 pips move on GPBJPY from 130 to 120 is a merely 10 yen.

Step 7: Use H4 50 Pips Price Action Analysis. Utilise on price movement on H4 candles within 50 pips range to determine where to enter a trade. If you do this you will realize that you can have up 16 hours and more to enter a trade. Trading this way you do not need to sit in monitor your chart endlessly to get trading opportunity. In the worst case scenario you only need to check the chart every 4 hours.

Step 8: Enter trades using only M15 trade-friendly chart: When the price get to your desired areas on the higher time, enter your trades at the best discount by using M15 on a trade-friendly chart. If you need further explanation read most posting about creating a trade-friendly chart.

Step 9: Understanding the importance of 50 point level on RSI: 50 point level on RSI on your trade-friendly chart is usually an area where price normally stalls, changes direction or continues on any time frame.

Step 10: Set concrete zone on H4 chart: Price usually trade for most currency within 250-400 pips over a period of time within a concrete zone. The concrete zone is a good guide on where to place stop losses. Place stop losses slightly above the concrete zone for your sell and slightly below for your buy. Read my previous postings on concrete zone for better understanding of the concrete zones.

Step 11: Take profit at pre-determined level: Set your take profit at pre-determined points depending on your expected returns. If you are trading the weekly chart anything less than 200 pips is a waste of efforts. You should be aiming for 200 pips and above.

I attach the monthly and weekly charts for a better understanding of the above analysis

Understanding Trends

What I will discuss today is understanding trend. I still have one or two things to discuss before finally discussing my current trading style.

Understanding trends

Many traders find it very difficult to understand trend. The simple truth is that you can only understand trend if you follow the weekly time frame. What most traders don't appreciate is that if a trend is up in the higher time frame it can remain up so for a month, 4-5 weeks, 35 days etc. Your chance of success will increase significantly if you trade in the direction of weekly time frame using the lower time frames to enter into trade. Put differently, if the weekly trend is down, your best bet is to sell the pull backs at least until price moves in that direction by about 900-1000 pips. On the other hand, if the weekly trend is up, the most profitable thing to do is to buy on the pull backs at least until price moves in that direction by about 900-1000 pips. Let me illustrate my analysis of the price action from in the last five months;

a) In April price the highest point for the year at 1.67460
b) Between May and July price fell by about 1000 pips to 1.5780 and pulled back to 1.6618 (838 pips) and present fell to a current low of 1.57050 (913 pips so far)
c) The monthly support and resistance are the horizontal red and yellow lines.

The above analysis is simplu a guide and had nothing to do with understanding trend. To have a proper understanding of trend, let us look at price action on the weekly time frame.

a) In terms of weeks, the fall was completed by 10 weekly candles and the rise by about 5 weekly candles
b) In terms of daily time frame about 35 candles
c) in 4 hours time frame perhaps hundreds of candles

I attach the monthly, weekly, daily and H4 charts as usual.

50 pips Price Action Analysis

I post my views here because I see a lot of traders struggling to understand the dynamics of forex market. I was in similar position a few years back and always glad to share my experience for the benefit of others. I cut my teeth here and I love sharign some of my new tricks here. Forex is an "organised chaos" and you need to an "helicopter eyeview" of the market to discern the pattern. 50 pips price analysis, which I explained belows, is one of the tools I now use to know the intention of the "big players". .

50 Pips Price Action Analysis (50-PAA)

50-Pip Price Action Analysis or 50-PAA is something I stumbled upon by accident. There was a day I had problem opening my MetaTrader and I had some trades running. To monitor live price action, I went to www.bbc.co.uk. There was a live forex chart on the website divided with horizontal lines which are 50 pips apart. That day price was consolidating within a very tight range of 50 pips. After about 8 hours, price was still within that 50 pips range. When price broke out of tight range it moved for about 150 pips. I found the observation interesting and replicated similar lines on my chart for closer analysis. I will now discuss some of the benefits of 50-PAA based on my analysis.

Daily Candle

50-PAA easily shows the average price movement in a single day. For example the cable generally moves about 80-120 pips per day and around 200 pips per day when breaking out of consolidation. The benefit of this is that you can fairly predict the range of a daily candle, identify consolidation, identify a breakout including support/resistance level. For example from the daily chart below it is clear that price has been consolidating between the yellow and red points (about 250 pips) for the past 11 days.

H4 Candle

As I mentioned in some of my previous postings here H4 is the key for day traders. It is easier to pick temporary support/resistance areas. Furthermore, you have the luxury of adequate notice to take a trade (this could be up to 16 hours in some cases) . From the H4 chart below, you can see where H4 candle consolidated for between 12-60 hours within a 50 pips range around support/resistance areas before a big move.

The benefit of 50-PAA for day traders is that H4 candle will give you up to 12 hours or more notice to enter the trade a good trade that would yield over 150 pips. You can then go to lower time frame at M15 to enter the trade. With this knowledge it will be easier to recognize 1st class trading opportunities and will never be under any pressure to enter into a trade.

H1, M15, M5 Candles

With 50-PAA it easy to see many H1, M15, M5 candles within a 50-pip range and easily recognize a break out or a continuation of a strong move.
Using this analysis it becomes easier to understand price movement without any complicated and confusing indicator.

See the relevant charts below as usual.

Benefiting from the greed of “big boys” - 1000 pips trade set-ups

What I will share with you today is how to benefit from the greed of the “big boys” using the 1000 pips trade set-up. As I mentioned in my postings on the Mastercharts that the major resistance/support for GBPUSD and GBPJPY are encountered after every 1000 pips price movement. After every 1000 pips movement for these pairs, expect a pull back. A circle for GBPJPY is divided into two parts of 500 pips each, while that of the GBPUSD varies. In a generous trading environment, the GBPJPY could complete this circle within 2-3 weeks and between 4-8 weeks in most times. GBPUSD takes between 6-12 weeks to complete this circle as a result of its numerous pullbacks.

The “big boys” are greedy and they don’t let go until they get between 900-1000 pips even when there is no justification for such price movements. That is why you see 300 pips wicks on weekly candles. How do you benefit from their greed? This predictable circle of 1000 pips price movement gives a very useful signal that a medium/long term trader could utilise to trade this circle successful over and over again. You cannot predict his circles, but the weekly chart provides very useful and insightful signals. To trade these circles, this is what to do:

a) Wait for a weekly candle to print a new high or low
b) Draw a horizontal line or circle at the lowest or highest point i.e. the wick of the candle.
c) From the lowest or highest price on the weekly charts calculate 1000 pips and put a draw a box to identify the likely target areas.
d) If price has not moved far from these points (less than 100 pips) you can enter the trade if you are ready to wait for some few weeks.
e) If the price has moved far (300-400 pip) it is better to place a pending order at the point where the reversal is expected (900-1000).
f) Follow the ride and jump off if you make some sizeable pips.

Look at the weekly chart for GBPUSD and the 1000 pips movements indicated by the red and yellow boxes. On the GBPJPY chart the levels are shown by the price movement between two yellow line or two aqua lines. Based on this analysis the expected target for GBPUSD if the bearish run that was reversed at 1.57800 is completed is around 1.67800. The target for the GBPJPY is around 135.00.

I have mentioned it very times, success is only guaranteed only when a trade has “helicopter view” of the market. Remember, the important thing is to take only first class trades because it is your money that is on the line. If the opportunity is not right, forget it and look for better ones. There are always better opportunities in this market. The reason is simple - this market is driven by greed!

Using mastercharts for day trading

We shall now discuss how to use the Mastercharts for:

a) Day Trading: Multiple trades targeting less than 10-50 pips at a time. Such trades should not be carried overnight, unless it is at BPE



b) Short term trading: Trades targeting 50-100 pips that could run for more than a day


c) Medium Term Trading: Trades targeting 100-200 pips that could run for 1-2 weeks


d) Long Term trading: Trades that could run upward to four weeks or more (1,500 pips and above)



Day Trading:

For day trading you need to take the following steps:

a) Draw additional horizontal lines every 50 or 25 pips on your chart
b) Use the H4 time frames to pick your trading opportunities
c) Your buy signal is given when the RSI on H4 timeframe enters the Red box and the sell signal when it enters the Yellow box
d) To enter a trade, go to M15 time frame and buy when both RSI on H4 and M15 enter the Red box and the sell signal when H4 and M15 enters the Yellow box
e) RSI 50 point level is where to take your profit or lock your trade (10-50 pips) per trade is adequate for this strategy.

See the daily H4 and M15 charts for daytrading. The sell signal zone on the charts are shown aqua boxes and the buy zones by blue boxes on the M15 chart.


short term Trading:
For the short term trading take the following steps:

a) Use the Daily time frame to pick your trading opportunities
b) Your buy signal is given when the RSI on Daily timeframe enters the Red box and the sell signal when it enters the Yellow box
c) To enter a trade, go to H4 time frame and buy when both RSI on Daily and H4 enter the Red box and the sell signal when Daily and H4 enter the Yellow box
d) RSI 50 point level is where to take your profit or lock your trade (100 pips and above per trade is ideal for this strategy.

See the Daily and H4 charts for short-term trading. The sell signal zone on the charts are shown by the aqua boxes and the buy zones by blue boxes on H4 chart.

Medium term Trading:
For Medium-Term take the following steps:

a) Use the Weekly time frame to pick your trading opportunities
b) Your buy signal is given when the RSI on weekly timeframe enters the Red zone and the sell signal when it enters the Yellow zone
c) To enter a trade, go daily time frame and buy when both RSI on Weekly and daily timeframe enter the Red box and the sell signal when Daily and weekly enter the Yellow box.
d) RSI 50 point level is where to take your profit or lock your trade (500 pips and above per trade (1500 pips most times).

See the Weekly and Daily for medium-term trading. The sell/buy zones on the charts are shown by the red circles on the daily chart


Long term Trading:
For Long-Term take the following steps:

a) Use the monthly time frame to pick your trading opportunities
b) Your buy signal is given when the RSI on monthly timeframe enters the Red box and the sell signal when it enters the Yellow box
c) To enter a trade, go to the monthly time frame and buy when both RSI on monthly and weekly timeframe enter the Red box and the sell signal when monthly and weekly RSI enter the Yellow zone. Historical analysis over the years have shown that you can begin to short if there is a reversal candle on the weekly when RSI touches 64-65 on the monthly. You can go down to the daily chart to get the best entry opportunities.
d) RSI 50 point level is where to take your profit or lock your trade (1000-3000 pips).

See the Weekly and monthly and weekly charts for long-term trading. The sell/buy zones are shown by the red boxes on the weekly charts. As you can see such opportunities rare. Personally I have not started trading at that level.


See the Weekly and monthly and weekly charts for long-term trading. The sell/buy zones are shown by the red circles on the weekly charts. As you can see such opportunities very rare. Personally I have not started trading at that level.

How to use mastercharts

I will use the GBPUSD to explain the usage of the charts. You will have observed that GBPUSD is my favourable pair followed by GBPJPY. GBPUSD is more rational, predictable and logical while GBPJPY on the hand is perhaps one of the most irrational and volatile currency pair in the world. If you read some of my previous posts you will have a better insight into the character of some of these pairs.



How to use the Mastercharts

Trading requires careful preparation and insightful analysis. This could be overwhelming and confusing to majority of traders. The truth of the matter is that most traders are incapable of undertaking the complex technical analysis required for informed decisions. The fundamental analysis is a different challenge entirely. I read somewhere that you need 100,000 hours of study to fully understand forex trading. Let me tell you the truth, this statement though slightly exaggerated might not be very far from the truth. However, as a result of my researches over the last few years, I have narrowed down this complex endeavour into some simple easy to understand strategy. The secrets of forex price action are in the higher timeframes. The first step in this process is to prepare the chart for any currency pair you wish to trade to be trader-friendly. How do you make your charts trader-friendly?



How to create a user-friendly chart


If you read my post on how trading could be colourful you will have a clear insight on how to achieve this. As a recap, here are the steps to make your charts user-friendly:

a) Open a new chart for the currency you wish to trade (GBPUSD in this example)
b) Go to the weekly timeframe and draw horizontal lines at the level indicated in my mastercharts. The major levels for GBPUSD are:

a. 1.73000
b. 1.63000
c. 1.53000
d. 1.43000
e. 1.33000
f. 1.23000

c) Insert Relative Strength index (RSI) for 14 days period.
d) Go to the daily timeframe and identify the historical high and low points on the RSI
e) Draw horizontal lines on the daily RSI depicting the historical high and low points.
f) Go to the weekly time frame and click on insert shapes and draw rectangular shape between the highest horizontal line on the RSI and 70 point level. Do the same thing for the lowest point and the 30 point level.
g) Select the rectangular shape above 70 point level and change the colour to yellow. You can select by double clicking on the shape first, then right click and pick rectangular properties and pick the colour from style.
h) Select the rectangular shapes below 30 point level and change the colour to red.


If you follow the above steps, your chart will look like the chart for my example. Your chart is now trader-friendly and you are ready to roll.

GBPUSD trading opportunities.

In the past few weeks, we have discussed the mastercharts for major pairs. Beginning from this week we shall begin to examine the interpretation of some of these charts beginning with GBPUSD which is the major pair I trade regularly.

As I have mentioned in some of my previous posts, if you want to be a successful trader, it is always advisable to concentrate on one or two pairs first. Trading this way, you will develop the ability to understand the key support/resitance areas, trend and price action for the pairs. By the time you understand a pair, it is alway easier to make profit consistently from your trades. In fact, you do not need to trade more two or three pairs to be a successful trader. Timing is very critical in this endeavour and the important ones are:


TIME TO WAIT
TIME TO BUY
TIME TO SELL
TIME TO TAKE PROFIF




GBPUSD closed around 1.61900 last week. Both the daily and H4 charts closed below the long-term bullish trendline from April 2010. The weekly needs to close below this trendline and 1.60000 to finally confirm that the bear has taken over.

Short Term Trades

Here are the targets for short trades:

1st support - 1.61000
2nd support - 1.60000
3rd support - 1.59350
4th supprt - 1.58000
5th support - 1.55000
6th support - 1.53000


Here are the targets for long trades:

1st resistance - 1.63000
2nd Resistance - 1.64000
3rd Resistance - 1.65500
4th Resistance - 1.67500
5th Reistance - 1.70000

The most important support/resistance levels for this week is the first and second resistance/support levels.

From where the price open this week, we have roughly 200 pips either way for this week. You will still need H4 to confirm immediate support/resistance and M15 for the best entry point. Please include RSI 14 days period with horizontal line at 50 point marks in your chart to confirm this support and resistance level on any time zone.

Long Term Trades

Here are the available targets for short trades:

1st support - 1.60000
2nd support - 1.53000


Here are the targets for long trades:

1st resistance - 1.63000
2nd Reistance - 1.70000

For long-term trades if weekly fails to break 1.60000, then a long will be a good trade and if the weekly fails to break 1.70000, a short will be a good trade. Both trades should be good for between 300-500 pips and will require between 3-5 weeks for it to play out.

I attach the weekly, daily and H4 charts in support of the above analysis.

Mastercharts - USDCHF

This is another pair I don't trade regularly. However, I did technical analysis on the pair for a reader on this forum. After the analysis, I decided to prepare a mastercharts for for the benefit of benefit of those who might be interested in this currency pair.

The major support/resistance areas for USDCHF are indictated on the yellow lines and the blue/red lines are the minor areas. They are located roughly 1000 pips apart.

As usual the monthly week, and daily charts are attached.

By the way, did you see the fall on the major pairs over the last few days? GBPUSD fell by about 400 pips from the highest point so far this weej. Check the mastercharts for these pairs in the previous post and you will see how a break of the major support/resistance precipates a rush to the next level.

Enjoy your trades.

Mastercharts - GBPCHF

This is another pair I don't trade regularly. However, I did technical analysis on the pair for a reader on this forum. After the analysis, I decided to prepare a mastercharts for for the benefit of benefit of those who might be interested in this currency pair.

The major support/resistance areas for GBPCHF are indictated on the yellow lines and the blue/red lines are the minor areas.

As usual the monthly week, and daily charts are attached.


My intention is to post Mastercharts for about a dozen pairs after which I will explain how to:

a) Update the charts
b) Use the charts for long-term trading
c) Use the charts for short-term trading
d) How to use the chart for day-trading

Mastercharts - AUDJPY

This is a pair I don't trade regularly except there is an irresistible opportunity. I however post it for the benefit of traders trading this pair.

The major support/resistance areas for AUDJPY are indictated on the yellow lines and the blue/red lines are the minor areas. The distance between each area are roughly 1000 pips each.

As usual the monthly week, and daily charts are attached.

mastercharts - USDCAD

Let me continue my series of mastercharts for some of the major pairs with USDCAD.

The major support/resistance areas for USDCAD are situated on the yellow lines and the blue/red lines are the minor areas. The distance between each area are roughly 1000 pips each.

As usual the monthly week, and daily charts are attached.

GBPJPY:

I am the view that trading should be based on sound strategy. The dragons major moves are around 1000 pips broken down into 500 pips. If you want to trade the dragon successfully, trade every 500 pips break to the upside or downside.



The yellow and aqua horizontal lines show the full circle of about 1000 pips, depending on where a move begins from. There is however a break of 500 pips between each circle.



The down move from 140 to 130 completed a circle, a new circle began from 130 and reversed at 135. It touched 130 and on its way back to 135. If the weekly fails to close above 135, then 135 to 125 will constitute new circle. You can see circle clearly on the weekly charts.



Price is currently trapped between 130-135. However, the monthly has actually indicated 135 as resistance and if the support at 130 area is successful broken 125 will complete the next circle.





Check the Mastercharts for the GBPJPY in my previous articles in the monthly, weekly and daily timeframes.

Mastercharts - EURUSD - Monthly and weekly charts

Mastercharts - EURUSD

The major support/resistance areas for EURUSD are situated on the yellow lines and the blue/red lines are the minor areas. Here are the levels.


1.60500
1.52000
1.41000
1.16600
1.07100
0.83300

Mastercharts - GBPUSD

The major support/resistanc areas for GBPUSD are situated around every 1000 PIPS. Here are the levels.


1.93000
1.83000
1.73000
1.63000
1.53000
1.43000

1.60000 is a major psychological level, the gateway to the top and bottom for both bear and bull. The monthly, weekly and daily charts are attached

the Major support/resistance zones for AUDUSD are basically around 750 pips. Here is the monthly, weekly, Daily and H4 charts

Mastercharts for major pairs

What I will share you over the next few weeks is the outcome of some of the research efforts I have concluded. I call these charts the mastercharts. The yellow lines are the major support/resistance area, while the blue/red lines are for minor support/resistance



Replicate the levels on the chart on your trading platform. They are good enough to guide to a profitable trading you for a long time to come.



I share these charts here for the benefit of the lucky few who will be disciplined enough to exploit their usefulness.



The charts are for monthly, weekly, daily, H4 timeframe charts for the majors pairs.



Have a good day!

GBPUSD - End of 1st Quarter 2011

The cable broke out of the concrete zone and the pullback currently sits pretty well on the concrete zone both on the daily and weekly charts. The target appears to be 1.70000 to retest the highest point in August 2009. This will then create a new range of 1.64000 to 1.70000. The weekly candle will confirm a breakout from any range.



I attach the weekly, daily and H4 charts in support of the above analysis



Enjoy your trading for the rest of the week!

GBPJPY - See where we are!

[quote=Articulate;4548624]



GBPJPY moves is usually 1000 pips per movement with a pause every 500 pips. The 1000 pips support and resistance points are depicted by the yellow lines, while the 500 pips resting points are shown by aqua color.



The red zone on the 14 days period RSI is the sell zone, while the blue zone is the buy zone. The horizontal line on the daily RSI tells you when a movement is weak or about to reverse. The daily chart is the best guide for this style.


The charts are attached. Have a colourful weekend![/quote]





I mentioned that the above posting is classical. See where we are on the weekly and daily charts. For short term traders, I attached H4 charts. I intend to post GBPJPY charts at the beginning of every quarter. Expect another one in May 2011

The blue zones

See where we are on the blue zones. It is always useful to plan ahead. I will be updating the blue zones every two weeks

Bigger Picture for AUDUSD

Audusd is currently trying to move back to the top of the weekly trendline from 0.80634, when the took off to the currently high. The trendline is what it holding the pair from rising higher for now. If the weekly successful opened and closed above the trendline, then the trend will resume on the higher time frame. If the trendline holds, the a fall to 1.02500 which is the base for the current move is possible. A fall below will drop the pair back to its concrete zone 1.02500 - 0.95000 where it traded for the past 6 months.

My view is that a big reverse is in the horizon, the monthly, weekly, daily are all dangerously close to the overbought zone. A touch of 50 point mark is due on the daily RSI.

Recommendation: short whenever H4 enters the yellow zone and take profit if it drops back to the 50 point mark on H4 RSI

This is the bigger picture.

Cable still respecting the the concrete zone

Cable is still respecting the concrete zone and the pressure is to the downside. For any move to the upside to be valid, the pin on H4 will have to be neutralised by another H4 candle above the pin.