Foreign Exchange: Following Through
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September 5, 2008
In my article last week I looked at a potential setup for a short trade on the US Dollar/Japanese Yen currency pair (FXUSJY in ProfitSource).
At the time, ProfitSource was showing a potential Wave 5 Sell Signal, which was backed up by some Gann analysis.
Chart 1 below shows the setup as it appeared last week.
Chart 1
click here to enlarge
Although the market had turned down from the potential Wave 5 high, it had not yet broken through the green EBOT line on the chart. So at this point, the trade was only a potential trade, not a “triggered” trade.
Over the course of your trading career, you will find thousands of potential setups. Hundreds of these will probably not be ready to trade on the day you find them; like the example above, you will need to wait for a trigger before you enter the trade.
This is where you really need to be treating your trading like a business. You need a way to keep track of potential setups. This is what sorts out the amateurs from the professionals.
One option is to keep a diary and write down all the setups you find, as a reminder for the future. However, a better way is to set yourself up with a routine. Choose the markets you wish to follow and the strategies you will use. Then find a way to check your strategy on your chosen markets, every day.
This is where having the ability to scan can really help you. You can easily get yourself into a routine of running your scans once a day on your markets. In the case of ProfitSource, you even have Precomputed Scans ready to go when you open your software.
By running your scan everyday, trades like the Wave 5 Sell on the Dollar/Yen will show up as potential setups every day until they are triggered or until they are no longer valid setups.
Traders with a consistent routine can follow through on setups they find, and take advantage of them. Traders without this discipline will find themselves looking back on a missed opportunity weeks or months later, wondering how they forgot about it.
For the Dollar/Yen, we didn’t have to wait too long for the trade to be triggered. Chart 2 below shows that the market closed below the EBOT on Monday, triggering our trade.
Chart 2
click here to enlarge
By applying the Range Projector to the Wave 4 low, we can see that we have a price target of 100.19.
I would encourage all students to think about the trades they have “missed”, and to consider how they need to change their routines, to ensure they don’t make the same mistakes in the future.
Don’t worry about the trade you missed, just be ready for the next one around the corner!
Be Prepared!
Matthew Barnes
Trading Tutors Team
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