daily and 4hr price action strategies

Tag Archive for: daily and 4hr price action strategies

4 Hour & Daily Forex Strategies

Not everyone is able to sit at the computer for hours a day and trade. In fact, many of you have full time jobs, family lives that keep you busy, yet you still want to be able to participate and trade in the market.

A lot of times, these are the emails I get from people, whereby they have the lives above, and only have a couple hours to trade after work. You don’t want to actively manage positions throughout the day because of work and are looking for a structured way to trade.

If this resonates with you and your situation, I recommend trading the higher time frames such as the H4 or daily charts.

Why?

Generally, the lower the time frame, the more detailed analysis you have to do, more variables you have to incorporate + the lower time frames require more attention due to price moving a lot faster.

More details + more variables = more time needed to make trade decisions on top of the need to monitor the charts more frequently. Thus not a favorable scenario if time is a very limited commodity for you.

The faster price movement also requires you to make many important decisions in a fraction of the time that you have at your disposal when trading on a higher time frame like the 4 hour or daily chart which significantly increases the cognitive load on a trader.

What is cognitive load you ask? Cognitive load refers to the total amount of mental effort being used in the working memory, similar to the working memory of a computer and refers to how much information an individual can consume/process in a given period.

A greater cognitive load means that you’ll exhaust your energy at a much faster rate which in turn can have an effect on your decision making.

Aspiring traders often are attracted to trading the lower time frames because they offer more ‘action’. But since they are not experienced enough, they are often unable to cope with the increased cognitive load, which renders them paralyzed at times or leads to very bad trading decisions.

Thus, trading the higher time frames is better suited for beginners and those with limited time available because

a) the skills of beginning traders aren’t fully automated yet and
b) the higher time frames require less time/attention.

To clarify, here is what I consider the higher time frames:

Monthly/Weekly/Daily/4hr on EURUSD

The overall guide on how to relate to this is:

Look at the monthly time frame chart if you are looking at several years+ worth of price action, and want to hold trades for about a year or more (often called ‘position trading‘).
Look at the weekly time frame chart if you are looking at just a few years’ worth of price action, and want to hold trades for several months at a time, perhaps close to a year
Look at the daily time frame chart if you are looking to do ‘swing trading’, and want to hold your trades for a couple days, up to a few months (perhaps quarter)
Look at the 4hr time frame chart if you are looking to do swing trading, and want to hold your trades for a couple days up to a few weeks (perhaps a month)

NOTE: These are general ‘guidelines‘. They are not perfect rules.

Now, how do you trade price action on the higher time frames?

If your primary time frame for trading is the 4hr charts for example, then most likely you’re doing ‘swing trading‘. In essence, you’re trying to capture larger ‘swings’ in the market.

Many traders (perhaps like yourself) want to trade the higher time frames and are wondering what daily forex strategies you can use.

There are many strategies we teach in our trading course, but one I’d recommend is a role reversal setup (or breakout pullback setup).

This strategy is best used when you are trading with trend.

Below are 3 major components for a breakout pullback setup:

find the overall price action context and trend on the daily time frame
find a key support level (for bear trends) and resistance level (bull trends) that has been touched two times before (at a minimum)
wait for the market to breakout and pullback to the level

If you’ve done those 3 things, you’ve likely found a good role reversal – breakout pullback setup.

There is more to this strategy, (what type of trend you are in, which are key support and resistance levels, what is the best price action context to trade breakout pullback setups, etc.), but you have the basics.

NOTE: If you want to learn more about this strategy and how to trade it, check out my price action course where I teach you exactly how I use this strategy with my own money.

Without a doubt, you can use the breakout pullback setup on the 4hr chart (or any time frame for that matter).

Here are a few additional tips you can use when swing trading the 4hr charts:

Have the daily chart as your ‘higher‘ time frame context. When in doubt, try to trade with this the most.
Don’t expect the market to go straight to your target.
NOTE:It may require a few pullbacks before it gets there. Eventually with enough skills in reading the price action context, you’ll learn when those pullbacks are part of the trend, or leading to a major reversal.
Mark your support and resistance levels on the daily & 4hr charts.

Below is an example of how to apply support and resistance:

In Conclusion

For those of you who have very busy lives, with a full-time job, family, and general commitments that you are unable to sit and trade for hours, there is a way for you to trade and participate in the markets, while not having to stay up all night.

For this, I recommend trading using the higher time frames, allowing you to be engaged in the market and able to make money without having to sit and monitor charts all day long.

I hope this helps for all of you who fit into this category and that you found this article informative and useful.

Please make sure to leave a comment below and your thoughts on it

Kind Regards,
Chris Capre

Set and Forget Trading – When To Use It and When Not To

A while back I heard a professional trader who ran a trading desk sum up ‘set and forget forex trading‘ strategies in one sentence:

“That is like getting in a car, putting your foot on the gas, and expecting to get from point A to point B without crashing – complete stupidity.”

By and large, I have to agree with him. There is a lot of confusion around set and forget trading, and it’s likely costing you money.

In today’s article, I’ll begin by sharing the fallacy in this way of thinking and how our brains are wired in relation to trading. Then I’ll cover the ONLY TWO SCENARIOS you should use a forex set and forget trading strategy.

From here, I’ll talk about evolving markets and how this relates to set and forget forex trading. After this, I’ll end with talking about how you limit your profits and how to avoid capping your growth as a trader.

The Irony & Fallacy of Set and Forget Forex Trading

The irony (and fallacy) hiding behind this one size fits all approach is it assumes you are responsible enough to make a good trade entry, stop loss and take profit, BUT you are clearly not mature, intelligent or responsible enough to manage a trade. How ridiculous.

To be fair, our brains are not wired for all the mechanics of trading, and our natural bias is negative towards most things, especially threats.

The translation of how this bias affects us is: we are more likely to close a trade when it goes against us (threat) vs. working for us (beneficial). And I’m sure you have experienced this yourself.

The Scenario
You are in a trade, everything is going for you, the price action is impulsive in your favor, you are in profit…and then…the first major candle goes against you. Immediately you think the move is over and you close the trade to lock in profit.

Has this happened to you? If so, its your brain and reptilian brain working against you.

(NOTE: For a great trading article on the negative bias in trading, read Why We Close Winning Trades Early)

Change & Growth Come Through Re-Wiring Your Brain

To be successful in trading (and anything), you have to re-wire your brain and change your habits. This is best done through repetition, focused awareness and skill based training.

We can either walk on eggshells around our negative biases (no growth), or we can learn to get past them (growth). Simply turning to a one size fits all approach for taking profit (or managing the trade) isn’t the answer. It leaves you crippled in terms of growth and assumes you’ll never get over it.

That is like saying you should never drink a beer (or glass of wine) because you’ll never be able to control yourself. Or you should never get a drivers license because you’ll never be responsible enough to drive on public roads. Ridiculous.

In reality, set and forget forex trading is simply ONE method for managing the trade. And it should (in reality) ONLY be used under two circumstances:

#1: You only have one, maybe two hours per day, and have no real way to manage your trades. Perhaps you work full time, have kids, and are just really really busy with a super tight schedule.

In this case, you are probably best employing a forex set and forget strategy as a profit taking method using daily and 4hr price action strategies, but there is a big assumption in this.

The Assumption
The scenario above assumes you are a) not trained in reading price action context, or b) your trade will likely hit its stop loss or take profit after you enter, but while you are busy.

Hence, unless you are not trained to read the price action context in real time, or the trade will close while you are at work, then you are a decent candidate for a set and forget forex trading strategy.

If your trade will take a few days, then this may not be the best method, because as it progresses, it may show signs it could go for a big runner. These are trades you have to take advantage of when they come, just like a really good poker player loads up on a strong hand.

Once you get good at reading the price action context in real time, you can also trail your stop and reduce your risk as the trade progresses. Almost every professional trader will reduce risk as their trades advance.

Very few will look at it as a hell or high-water scenario, which is what you are saying when you use a set and forget trading strategy as your method.

The other scenario is below.

#2: If after exhausting all other methods of managing your trades (taking profits and adjusting your stop), and the ONLY baseline method which showed profitability, then you’d be a decent candidate for the set and forget method.

This one is pretty straight forward, and the risk of ruin needs to support your decision. Without it, you could have the numbers working entirely against you without even knowing it.

Thus, if you are that trader who falls outside of the two above reasons, you should explore other options, and develop an accurate baseline for gauging which method you use.

Markets Evolve Over Time

The bottom line is the market evolves as it progresses over time. This can happen intra-day, daily, or over days and weeks. Those that train and learn to adapt with such changes in real time will have their finger on the pulse and maximize opportunities.

This is what institutional traders do. They adjust and evolve their positions as the market does, just like a poker player will become more aggressive (or conservative), based on the players around him, and the size of his chips.

Just realize if you don’t explore other options for managing your trades, and train to get beyond your weaknesses, your growth will be limited, and your profits will reflect this.

Having A Curfew on Profits

But perhaps that doesn’t sway you. No problem, just imagine the following scenario:

It is the first week in May, 2013. You have just entered short on the AUDUSD on a break below the key support level around 1.0225. Your stop loss is just above the daily 20 EMA, so -100 pips, and your ‘set and forget‘ target is +200 pips, or +2R.

About a day later, it comes out on the news that George Soros has sold over $1 billion of the AUD. Considering Soros’s history, and that he doesn’t just get in and out in a day (along with the glaring fact other professional traders will likely pile on this trade), chances are this trade is going to run.

Yet…here you are, just a couple days later, saying ‘nope, I only set and forget because I ignore everything and cannot manage my trades responsibly, so I have this curfew on profits‘.

About a day later, you hit your +2R profit, thinking you are a darn good trader. This is your chart below.

Looks great eh?

And then you see this…

Keep in mind, this situation above happens on a micro-scale almost every day, sometimes many times per week.

So when you consider employing a forex set and forget trading strategy, realize there are other options, and this should only be used in very specific circumstances.

Also understand, if you choose to use this method while you have other options, you are a) putting a cap on your upside profits, and more importantly b) putting a limit on your growth and development as a trader.

There are many other methods for managing your trades regardless of what time frame you trade. For those wanting to learn more about these methods and how to leverage them in your trading, learn about my Trading Masterclass Course where you get access to our daily trade setups commentary, trader quizzes, private member webinars, live trade setups forum, and more.

Trading Strategies

Don’t Trade Forex Unless You Are Doing These 4 Things

You might have had a few profitable months trading live this year, but if you are like 92.5% of all traders out there, when the clock strikes 2015, your account will be negative.

In almost all endeavors, the dividing line between success and not making it is a fine one. Likewise, such a dividing line is drawn daily by what you do, and what you do not do.

Another way of putting this would be – those who will be profitable at the end of 2014 will generally do the things consistently others will not.

The great thing is, you can be one of those in the green at the end of this year. To get there though, you’ll likely have to make a few changes to what you are doing.

Here are some simple steps you can take to put yourself in the 7.5% who will be green at the end of the year. These are the 4 things you should be doing (minimally) if you are trading forex.

1. Being Mentally Prepared

Ever go to a professional sports event 1-3 hours before the game started? Besides empty seats and reporters giving up to date info, you’ll see one constant every time. The athletes themselves are preparing.

All professionals simply know you have to prepare before each game/event/match. Keep in mind, these professional athletes are already successful, yet they prepare regardless. In trading it is no different, although most of our preparation is mental.

Being mentally prepared, means knowing what you are going to do during your trading day, and how you are going to do it. It is tuning your mind to give yourself the greatest mental edge possible.

Ask yourself do you prepare mentally each day? Do you have a routine you go through before you hit the buy and sell buttons? What do you do to build a successful mindset?

Interesting Story: I had a student who started off his first month of live trading in the red. The next month, he upped his game gaining +11% for the month, mentally prepared for each day.

Ironically the following month, he stopped his mental preparation, and as suspected lost money.

After doing his private follow up session with me, we got him back on his mental preparation routine. Where is he at for the month of May? Up almost 7%.

2. Have A Trading Plan

One of the most important documents you will have as a trader will be your trading plan. This is what you will follow each day from the beginning to the end of your day. It is to guide your actions, along with helping you measure habits and patterns of behavior, to see what is working (or not).

There are generally two types of trading plans:

1) Day-to-Day Trading Plan (actions to do/follow daily)
2) Business Trading Plan

Most ‘authorities’ and ‘masters’ of price action promote only the first one, and they do so in a highly limited way.

Generally such freshman trading plans cover the typical vanilla things, such as;

1) Price Action Signals to Trade
2) What instruments you will trade
3) % Equity Risk Models
4) Stop Loss and Take Profit Rules
5) Rules for Entry & Exit

Look familiar? These plans are completely inadequate by themselves. They myopically focus only on the mechanics of an actual trade.

What about mental preparation? What about reviewing your trades? How you will treat trading as a business, and measure properly if your business trading plan isn’t working?

Just like the CEO has a business plan, or the NFL coach has a game plan, you should not be trading without a trading plan.

NOTE: For a really good article on How to Build a Proper Trading Plan, click on the link.

3. Have a Way to Measure and Review Trades

Most traders in the red come end of the year do not measure their trades. The irony is, usually a small adjustment to what you are currently doing will help you trade consistently profitable. One of the best places to find this information is in measuring and reviewing your trades.

Measuring your trades is initially done through a trading journal and performance worksheet. The former notes all the details about each trade, while the latter analyzes the performance of each pair, strategy and time frame.

Have you considered the fact you may do really well with a few pairs, yet consistently lose money with others? How would you know without measuring your trading performance?

Reviewing trades is probably one of the hidden secrets you’ve overlooked to boost your performance and skill set. Sometimes looking at charts of past winners and losers will help you spot patterns and price action context you missed before.

NOTE: For a good article on reviewing trades, visit the following link: Reviewing Trades – Two Crucial Tips

I actually have a folder full of screenshots for winning and losing trades. I also have a folder of screenshots whereby the charts show great examples of a price action pattern working out. By reviewing these charts at the end of the week, I am wiring into my brain to look for these patterns, thus being more likely to spot (& trade) them in real time.

For more information on end of the trading week review, click on the link here.

4. Continual Training

Most developing traders seem to think that once they are profitable, the training ends. Does a concert pianist ever stop training? Do high level martial artists ever stop training? Do Buddhist monks ever stop training?

No. So why would you think that training ends at some point?

Do you have two hours set aside to trade each day, but no trades available with your set and forget strategies? Don’t walk away and be a lazy trader – study, practice, or best of all – do live simulation trading.

Is it a holiday and the markets are closed? The answer is the same.

Anytime I am not trading for the day (for whatever reason), I Use Forex Tester 2 to Accelerate My Learning Curve. FT2 allows you to do live forward simulation trading on any pair or time frame, with at several years of data available.

Need help with your pin bar trading? Use forex tester 2. Having trouble trading support and resistance key levels? Jump on forex tester 2.

It’s like the golfer going to the driving range – but for trading.

This is a great way to build your skill set and get real practice time executing trades in with live forward simulation. You could literally do 50-100 trades in one hour with forex tester 2, which may take you an entire year to do on your own.

I could spend a day talking about the benefits of this as the list is long, but for those trading daily and 4hr price action strategies, you’ll need to increase your trade/rep count to build a sufficient skill set. FT2 is the best way to do this.

You Will Need This Though…
One might think that having a strategy with an edge is one thing you shouldn’t bother trading without.

I agree, but I think this should be a part of your trading plan. If it’s not, then your trading plan is incomplete.

In Summary
All high level professionals do a minimal amount to perform well in their chose field, and that minimum amount they do is often more than those who are not successful. Trading is no different.

If you decide to trade anyways without doing these 4 things above, expect sub-par performance. More importantly, don’t expect the best out of yourself.

With that being said, what things would you add to this list?