Back To Basic Part 1 - Lets Get Naked

When we are born in this world. We are all born naked. We do not carry money or bond certificate or even Rolex watches. All are born equal. It is what we do when we are growing up made us what we are today. Some are powerful men while others, just a waste of time.

When we start in Forex, most of us started at the same place. A blank chart with candlestick and grid. Simple and clear but because of greed, ambition etc, most of us jump straight to advance system. Advance system with colourful indicators here and there and through all those we forgot to pay attention to the very basic of Forex charts that is ..... PRICE.

THE NAKED TRUTH



What you see above is the very basic of forex charting. Its candlestick and grid. Plain and simple yet how many of you actually take a look at it and try to understand it. Not much in it yet not many people care to look at it and try to understand it. Let me lay this out one by one.

First we have the grid. Its the horizontal line with price at the right side. When we talk about forex, price is the most important thing...period. If Forex has no price then I wouldn't be here wasting my time for nothing. Its the soul purpose of trading forex. If you look at the chart closely, you will see that I have traded short with 2 take profit point of same place but at different time. You can also see where my stop loss and take profit was. That's why I love Marketiva charts. Its shows you everything.

The chart is divided by the grid with many horizontal line. Each horizontal line has its own price and the grid changes according to the market. If the market is active, the grid will become bigger and vice verse. If you look at the chart properly, you will see that the price actually responded to the grid. The price will move up and break the line one at a time during slow uptrend and break a few line at once during heavy trading. Now, the question is what can we do with that behaviour?

Let me explain to you my previous short trade. When and why I took the trade. I entered GJ short at 200.40 with 2 position and immediately put stop loss at 201.00. During my last entry the grid was at 200.40 and the top line was at 200.98. That is 58 pip grid wide. Meaning that my stop loss and take profit will be at 58 pip each. So I took the short trade at 200.40 with SL @ 201.00 (rounded numbers, easier to remember) with 1st TP @ 199.80 (rounded number to nearest line). My 1st TP was hit and closed 1 position. The 2nd position SL was moved to 200.41 and eventually 199.80 when price broke the next line.

Its all about numbers. 199.80, 200.40 and 201.00. What a coincidence. They are all 60 pips apart. Meaning 2 post win at 60 pip each, so far tonite I got 120 pip in the bag from grid trading alone. Currently I have a stop order to short GJ @ 200.60 and SL @ 201.00. Now that is 40 pip wide. What happen to 60 pips apart??? As I said before, the grid changes according to the market so pay attention. The stop order may not get hit but at the time of writing, the grid at 200.56 is already hit and missed my order by just a few pips.

I am sure by this time, some of you will have lots of question and doubt. Put all those question and doubt at rest and look at the naked chart. You may find that the hardest question may have the simplest answer. You just have to tackle the problem one at a time.

IT IS A RISKY BUSINESS

As of this morning, my stop order on GJ is filled. Currently GJ has already broke the 1st TP. SL will be move to 200.56 in due time. The plan currently is to follow the price at each level.



1st TP is broken if the current candle close below 200.14 and SL will be move to 200.56. When price broke the next level at 199.72, SL will be move again to 200.14 and so on. Moving the SL to the previous level each time price breaks a new level. That is the game plan. Btw, I am writing this in real time and this article will be updated from time to time until this chapter is finish.

I wont lie to you, Forex is a risky business. The risk is so great that every businessman will avoid it once they knew the level of risk involved. In order to be profitable in Forex you must control the risk and maximize the return. The only question is how much risk are you willing to take? As for me my risk tolerance is around 60 pip. So in order to find a trade that suit my risk, I would cycle through different chart and timeframe until I find a chart with grid small enough to suit my risk tolerance. Meaning this kind of trading doesnt require you to stick to any timeframe. Timeframe depends on the level of risk you are willing to trade. You can even trade GJ off weekly chart if you can stand the risk of 585 pips.

Current GJ position has initial risk of 40 pips only. If GJ decided to turn around and go the other way, I will surely lose 40 pips only but if GJ move according to plan, my minimum profit will be 40 pips. That is 1:1 risk/reward ratio. With the plan of following the price at previous level, I should get a better ratio than that. You cannot win everytime but make sure that when you win, you win big.

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