Yesterday morning I wrote that I bought GBPUSD amidst all the bad news of its decline. I did so because it dipped to polarity (actually a bit below) but there were signs it was not going lower. The trade hit its target this morning at 1.6001. I bought at 1.5736. My profit was 265 pips. Not bad for a trade that looked fairly obvious.
It’s important to point out, though, that while the pips came fast and easy, they didn’t come by magic. They didn’t come by luck. They didn’t come because of some obscure method which has been whispered down through the ages and for which I paid $15,000 to learn.
The pips came because I do the work. I study my charts. I draw my significant lines. I calculate confluence zones. They came because I’ve built a strong habit of needing to see at least three reasons to take a trade. These three things can come from various things—support and resistance, candle or bar behavior, patterns, fib levels, Elliott Wave, anything that I have reasonable faith in as a technical analysis tool. But there has to be at least three present.
I’ve long jotted down the reasons I was taking a trade in my journal. The journaling keeps me honest and it’s the number one piece of advice I offer to traders. Keep a journal. Print the screen shot. Then you have something to go back to and study if you find your trades aren’t working out. It’s also a nice record of when they do. When you write down the reasons for taking a trade your trades will get better over time. You can no longer fool yourself about what and why you’re doing. It’s true that these days I take some trades where I don’t write first. As I go along my eye seems to get better. Or maybe it’s just reflex based on the rigor I practiced during the last few years. Regardless, I still jot down the reasons for the majority of my trades. And so should you.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.