7 Reasons Why I Only Take a New Trade at the Completion of Each Candle
In this video:
00:29 Reason #1 – helps you plan around your trading
02:57 Stop from over trading
05:03 What’s really happening in the market
I want to talk about the 7 reasons why I only look at taking a new trade at the completion of each candle. So let’s get into that right now.
Hi Forex traders it’s Andrew Mitchem here and I’m the owner of The Forex Trading Coach and in today’s video and podcast I want to explain to you the 7 really important reasons why I only consider a new trade at the completion of each candle.
So let’s get into those right now.
Okay, reason number:
1. It helps you plan around your trading. If for instance I’m trading on the daily charts, I know that I just need to look at my charts once per day at the completion of the daily chart which is at 5pm Eastern Standard Time (EST), New York. If I was trading 4-hour charts, I know that I don’t need to look at my charts until 4-hour chart closes so if that just happened I know that I’ve now got another almost 4 hours before I need to go and look at my charts again. If I was looking at trading the 1-hour charts for instance I know that until the candle closes at the top of each hour, I don’t need to look at charts again. So put that together; in basic terms it means that I can plan everything else – my day, my family whatever it is I need to do around my trading and it allows you to set that up as a structured plan.
2. It keeps you away from your charts. I don’t know how many emails I get from people saying, “Andrew I’m just stuck at my charts all day, just frightened to leave my charts, worried about each pip”. You know, you don’t need to do that. If you were to trade daily charts, you look at your charts once a day; don’t go near them until the next day. If you’re trading 4-hour charts, don’t go near them until the next 4-hour chart closes, etc. So you can see how by trading only on a close of a bar, how it keeps you away from looking at this thing being glued to the charts all day long. That’s not what your trading is all about. Good trading means taking a chart setup and making a decision placing your trade, leaving it, walking away. So get away from your charts.
3. The third reason is it takes the emphasis of way from indicators and so many people that caught up in technical indicators when A crosses B and this line crosses over that dots of line and something else happens, you know, it’s just ludicrous. You don’t need to be trading like that relying on those lagging indicators. If you look at candle patterns as a technical trader then it helps to shape the market and help you to understand what’s happening in the market. You don’t need to be relying on an indicator crossing over something else that could happen at any time of the day or night and that’s why people start trading too often which then leads on to point #4
4. By understanding candle patterns, by trading and looking at the candles on the close of each candle. It stops you from over trading. And again it’s something that so many people get caught up within the wrong way. It’s that they think that they make more money. By trading Forex you have to take more and more trades – that simply is not the case. If you over trade all you’re going to do is become really, really trigger happy and you’re desperate to take new trades, you’re searching for new trades all the time; you don’t need to do that. So get away from your charts and take less trades but take high quality trades and again that’s what understanding candles can help you with.
5. It helps you with your trade management. You see why look at closing part positions at 23 minutes past two (2:23) as an example. If I’m trading the 1-hour charts and I have a trade open I don’t make any management position in terms of: Do I move my stop, Do I close part of the trade; whatever it is I want to do. I don’t do that until the close of the next 1-hour chart. Same as on the daily charts if I’m still in a trade on to the next day I’ll then look at the completed candles day chart, look at it, see what it’s looking like, is it still looking like it’s in my favor (yes or no) and make a decision then. So it helps you with your on-going trade management.
6. It allows you to trade on any time frame chart. I’ve mentioned three. I’ve mentioned the dailies, the 4-hourlies, and the 1-hourly. They just happened to be my personal favorites but if you wanted to trade 15-minute charts then look at your charts once every 15 minutes on the completion of the bar. If you wanted to go longer term of that onto let’s say weekly charts, just look at the charts just once a week and make a decision on that. So you can trade anytime time frame chart that suits you and of course it still needs to be showing the good quality setup. But it allows you trade, a range or whatever it might be one particular time or if it’s short or very long or combination whatever it is that suits you.
7. Lastly, candle patterns allow you to gain an understanding on what’s really happening in the market. But you can only make that decision on the close of that completed candle. If the candle has a big long tail when it closes bullish that tells me that there’s been a lot of sellers in the market at some stage during that formation of that candle. The price is going all the way down, it has formed a bounce level, an indecision, it has formed the support level and the then the price has been pushed up and up and up by the buyers in the market so by the completion of this candle, the buyers are firmly in control. That’s what you would see for instance in a bullish pattern with a long tail and you’re getting indecision candles where either the buyers or the sellers are in control and you get a doji style candle and indecision candle within the formation of that particular time frame so whether it’s a bullish candle or a bearish candle, an indecision candle whatever it is; the candles can really give you a picture, a mental picture of what’s actually happening out there in the market. Are there more buyers, are there more sellers, are the buyers pushing the market up? But hey now, it's reached a certain level because if you look back across several hours or several days ago the price hit that same level and it went down again. So likelihood is we’ve reached that level again as a resistance and the candle pattern then looks the bounce off that level, we could be heading down again so candle patterns really do help you to gain an understanding of what’s happening in the market.
So there are 7 really important reasons there that I’ve given you and shared with you of why I believe it’s important to only trade if you’re looking at candles and buy charts etc., if looking at that as a technical trader only trade a new position or open a new position or make a decision on any open trades that are already opened.