Trade what you see and not what you think might happen
In this weekly video:
00:28 – Read the charts
00:45 – The Brexit example
01:50 – The Pound should be falling, or not?
02:42 – The importance of trading what the charts show you
03:48 – Trading with the KISS approach
I want to talk about why you as a trader should trade what you see on your charts and not what you think might happen. There's a big difference between the two, so let's get into it.
Hey traders, Andrew Mitchem here from The Forex Trading Coach with video on podcast number 311.
Read the charts
And I want to talk about something that's very topical right now, especially when you think about the British pound. And I want to talk about the importance of why, to be a good trader and a successful trader, you should really trade what you see on your charts and not what you think should or might happen to a currency path.
The Brexit example
I'll give you a great example. So here we are today, 1st of March, 2019. Now I live in New Zealand, but on the other side of the world far away from me we're having that Brexit issue still dragging on. It just seems like it's been going on for months and months and months. And all I read on the news is Theresa May might be doing this, Corbyn might be doing that. Are they going to leave? Yes or no? Brexit, is it going to carry on with the vote that everybody wanted to leave, or the majority wanted to leave? Are they going to change things? What's happening with Ireland? Europe's getting involved. And to me, as an observer, it just seems like a complete and utter mess, and nobody seems to know what's happening. You kind of get that with I suppose a lot of politics around the world. But it seems a particularly big mess, and dragging on and on and on.
So you think about that logically. What could or should that be doing to the British pound? Well, to me I'm thinking, well uncertainty. Nobody knows what's happening. Are they going to leave? Are they going to make big exit fees to leave Europe?
The Pound should be falling, or not?
The pound should be absolutely crashing. All these big businesses, and industries, and banks, they're all saying, “We're going to leave Britain if they leave Europe,” or the Eurozone. And everybody should really be thinking the pound has to fall. It has to fall. It has to crash. Yet you go and look at your charts for this year, for the first two completed months of this year, and all we've seen is the pound against the US dollar has rise about 950 pips. Against the Australian dollar it's risen about 1100 pips. Against the Yen, it's risen about 1500 pips. And it's almost a straight line. It's just gone straight up when everything that you think should say it should be going straight down. It should be doing the opposite.
The importance of trading what the charts show you
So we talked about this on my webinar last night with my class. And it's all about the importance of trading what you see on the charts, because if you think about this fundamentally or almost logically, you'd be just taking sell positions, or thinking you should be looking for sell positions all the time on the pound. Yet this year, so many weeks of this year so far, I've said to my class, “On a weekly bars, I'm looking for buy/trades on the pound/US, or pound/Yen, pound/Aussie, pound/Kiwi,” because that's what we're seeing. And then you take that down to a slightly smaller timeframe and you look at each day, and many, many times we've been saying buy/trades on the British pound pairs because that's what we're seeing.
And that's the important thing here. Look at what the charts are doing. It doesn't matter what you think, or what someone else thinks, or what CNN thinks, or what some fundamental trader thinks. It does not matter. The only thing that matters is what's happening on the charts right now, and making sure that you're on the right side of that. That's the real important thing. I think a lot of people miss that point.
Trading with the KISS approach
You know, trading comes back to the KISS approach, the Keep It Simple, Stupid. You know? It's looking at what's happening on the charts, having a good strategy, and trading what you see, not what you think.
So I hope that helps. This Andrew Mitchem at The Forex Trading Coach. I'll see you this time next week. Bye for now.