Forex Chart Survival – Short Term

Short term trading in forex.

You all want to learn how to do it. You all like the action, the excitement, and maybe even (as I do) the challenge. It’s most likely that most ¬†of you continue “trying this” in attempt to make fast money, leveraged to the hilt and looking for that “big trade”. Well….you won’t find it trading short-term smaller time frames, let me tell you that.

The big trades are found on the long-term charts when a move is caught on weekly and monthly turns. Trouble is, you get stopped out on a 50 -100 pip move against you trying to “nail it on a 15 minute chart” – before you’ve even given the trade a chance.

In my view, if your account/trade can’t absorb a loss of an “entire candle” on the time frame “above” the one you are trading ( so a measure of ATR which is the “average true range” to get an idea ) you’ve really got no business trading it.

So for example….you see on a 4 H chart where an average candle might be 160 pips, and you’re trying to trade with a -25 pip stop? No chance. You will be ground to a pulp time and time again.

Everyone has to do this math on their own as everyone’s account size is different, but it cannot be overlooked. You need to trade significantly smaller with much wider stops to even survive the daily noise on 15 minute charts and lower. That’s just to stay in the game over a 24 hour period!

I can go on and on about this, and “do plan to” at a later date ( possibly through a series of videos I’m working on) but as it stands…and considering the volatility these days – the best possible advice I can give today is:

Trade smaller and trade wider. You might just survive.

8 Responses

  1. Anonymous January 30, 2014 / 9:49 am

    Great advice. That goes with any trading in my opinion stay small for what ever small is for you and live to turn the lights on the next day.

    • Pot Stock Watch January 30, 2014 / 10:10 am

      You bet…..

      You MUST STAY IN THE GAME LONG ENOUGH to be there for the “big opportunities”, and the only way to survice this mess is to “take it down a notch”, and keep chipping away.

  2. slimpickens January 30, 2014 / 11:21 am

    UUP calls up 20%….Thanks Kong. I would have never taken the trade on my own. A bear flag forming under the MAs on the daily chart has almost always been followed by a move down in price. I’ve got a lot to learn. Do you think this rally has legs?

    • Pot Stock Watch January 30, 2014 / 11:36 am

      USD should run into resistance up around 81.43 ( go grab a chart of $dxy ).

      Or $USD at: http://stockcharts.com/h-sc/ui?s=%24usd

      Add this symbol to your usual watch lists.

      Ya that was the USD move I was aiming for – with perhaps another day / few more points before running into overhead res.

      Booking profits is always a good plan…(especially with those options) as even the smallest move lower will have you back at zero.

      Call it a good trade and go grab a beer!

      • Pot Stock Watch January 30, 2014 / 11:51 am

        Or at best….check things out Friday / Monday.

        I do expect the next “short term zig n zag” in USD coming soon…but it “should” make a higher high first.

  3. JSkogs January 30, 2014 / 12:45 pm

    Very sound advice in this post man. Build small and slowly, with a thesis in mind. If you are right, and patient, the gains can be quite astounding. I have trouble with patience and that’s what your blog really helps me. Everything still looks a bit messy hey. Made some money off the USD long trade. Thanks Kong

    • Pot Stock Watch January 30, 2014 / 1:06 pm

      It’s a difficult thing- getting the “psychology of trading” flipped around, from being hell bent on “solving it overnight” to learning to just be “thankful for what you can get out of it at all”.

      Small wins eventually turn into bigger wins, if in fact you’ve managed to stay in the game long enough to beat the learning curve.

      Most unfortunately, don’t really even get out of the gates. It’s too bad really.

  4. Deano January 30, 2014 / 11:25 pm

    Good advice Kong,
    Just to add that this doesn’t mean reducing the reward:risk ratio. I won’t get out of bed for less than 2:1 and prefer 3:1+ and you’re right in this market a 4H ATR of less than 50-75 pips suggests too much market indecision and suddenly you’re guessing – too hard for me.
    Avoid the news, trade the technicals, be patient and stay alert, and you’ll be fine.

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