Overlooking the Obvious
In trading, as in life, it’s too easy to overlook the obvious. I was analyzing a GBPUSD chart and I was looking at current price activity, intent on identifying direction. I was pointing out how the previous candle closed above Friday’s high and the weekly had a doji blah, blah blah…and our Head Trader, Al, who was looking over my shoulder at the chart, leaned forward and said “it’s going sideways Jay”.
It’s that simple. It’s going sideways, so pull back and wait for a move above or below the current range.
It was a great reminder to look at the landscape first before the individual trees. And it also pointed out the tendency I have — and I suspect many of us have — of falling into micro-analyzing a market or trade. There is nothing wrong with trading lower time frames in markets which are consolidating or distributing if you’re equipped for that, but we need to keep it in perspective when analyzing markets on the higher time frames.
Another great bit of wisdom he used to give me was: “Scrunch up the chart”, which meant I didn’t have enough time/data on the screen. It’s easy to get into the habit of homing in on current price action, and end up missing the big picture.
Jay
Jnorris@brewerinvestmentgroup.com
Jay Norris is the author of Mastering the Currency Market, McGraw-Hill, 2009 and a Trading Instructor at Trading-U.com and a Senior Market Strategist with BrewerFX in Chicago. To see details of Trading-U’s available course work go to Trading Course To schedule a complimentary, interactive tutorial with Jay on determining market direction and hear more about “Live Market Exercise” go to One on One Tutorial
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Risks include the potential that changing political/economic conditions may substantially affect the price/liquidity of a currency. Investors may lose all or more than their original investments. Any charts shown here represent market conditions at a particular point in time. Such conditions may not be replicated in the future. Past performance is not indicative of future results.