You must have a coherent strategy to make a profit trading forex, it’s no good throwing a pile of indicators on your chart and waiting for them to line up, that is not being coherent, that’s just creating confusion.
Higher And Lower Forex Timeframes.
A coherent strategy would consist of looking at the daily charts and forming a view of what the market might do over the medium term, placing support and resistance lines on these charts and then zooming in to find some optimal entry points for your trade. You need to create a trading plan which gives you an overview of what might potentially happen, identify the potential levels at where the market might reverse or continue, and stick to them. The problem with a lot of new forex traders is that they react to what the market does, the market starts to move and then they try and jump on to that move, only to more than likely see the move come to an end and reverse and take them out at a loss. One of the biggest parts of trading is your psychology and how you react or not to the market, if you’re prepared for what the market might do, then when the market arrives at that point you have a pre-determined plan to execute.
Putting Your Forex Strategy Together.
Starting from where every forex trader should with their strategy by looking at the longer timeframes and then the shorter ones to identify an entry point, you need to look for where the tools that you use confluence. By confluence I mean where you have a Fibonacci level coincide with a previous support and resistance level, matching an oversold indication on a CCI indicator with an oversold indication on a stochastic indicator will not cut the mustard in forex. Neither will using a MACD indicator and simply reading a few candlesticks where the MACD indicator crosses over from positive to negative or vice versa. If you take a higher timeframe into account you will be able to identify if an oversold or overbought indicator is valid. If say you have an overbought signal on a forex pair but the price is still rising, ok you wouldn’t just counter trend against it at any sign if you’ve a little experience, but if you are looking at the higher timeframe you would know not to even consider going short until you have at least hit that major level of resistance. You need to learn what goes to together and how and when to use them, divergence is a great strategy to use with the oscillator type of indicators, but for finding a reversal at a major support and resistance with a corresponding double top or bottom.