Reading the Candles as They Emerge

Filed under: Learn Forex Trading |

 

Today in my live trade analysis, I went through an example of not looking at what the candles are telling you as they emerge (when you really should), and I would like to discuss this issue more for today’s forex related article.

 

As each candlestick emerges, the story changes. That is as simple as it can be put. The candlesticks create a narrative of sorts, telling traders the history of what has happened, right up until the present. As traders, all we can do is to look at this story, and like any story, try to predict what will happen next. When you watch a movie, you cam often predict what will happen next based upon the narrative up until that point. Sometimes you get it right, and sometimes you get it wrong. And this is the way with forex trading.

 

However, what I did today (using the movie metaphor), was to watch part of a movie, make a decision about what might happen next, then watch some more of the movie which then pointed to my prediction being wrong, but rather than change my mind, I stuck stubbornly to my idea. The point is that you have to update and review your ideas after every new candlestick has closed (open candles do not count).

 

This might not work so well with set and forget systems, and in fact, once a trade is on, I rarely tinker with it based upon what the candles are doing. Changing your trading parameters based upon what the market is doing is a very difficult way to trade, as it constantly brings your emotions into play. However, with orders that are yet unfilled, I think that reviewing new candles is a must, and should not be ignored. Thus, reading the candles as they emerge could be a key tool in your trading arsenal.

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