Lesson 16: Match Yourself to the Market

We must remember that we are traders, not investors. We covered Fundamental Analysis first (how to value currencies) because doing so makes the currency market transparent and unthreatening. But we (traders) understand that most of the time the market is ruled by emotion, (why else would prices fluctuate when there has been no change in valuation) So we trade emotions most of the time and changes in valuation as and when they occur. To increase our chances of success we trade the most liquid pairs, EURUSD, USDJPY, GBPUSD, USDCHF, AUDUSD, EURJPY. All traders are looking for the same thing, overbought and oversold areas. So the more traded a pair is, the more likely these areas (OB/OS) are to work. EURUSD is the most liquid of all pairs and is where we should start.  A lot of people assume that one can only trade if they give up their day job, this is a complete misnomer. Only day traders need to monitor the market constantly throughout the day. The key thing is to find the smallest timeframe you can trade comfortably because the shorter the timeframe, the more setups you get and thus more profit you will make. But you need to remember that every time a session closes you will need to take a look at the chart, a 1 hour chart means we need to look at the end of each every hour (because we use the close as our signal). We have a few options. 1. trading off the weekly or daily charts means we never have to look at the market during the day, but reduces our returns. 2. venture into the hourly charts, H1 requires looking 8 times at work, H4 only twice. OR 3. Daytrade the AM (6am-8am) or PM (5pm-7pm) sessions before/after work. We should play around for a little while but ultimately we want to decide on one pair, one timeframe and one setup because we need to become experts. If we keep changing the parameters we will quite literally become Jacks of all trades, masters of none.