Your Best Trading Signal Formula Revealed (Forex, Gold)
If you are looking for a way to increase the accuracy of your trades, I prepared for you a simple yet powerful checklist that you can apply to validate your trades.
✔️ - The trades fit my trading plan
When you are planning to open a trade, make sure that it is strictly based on your rules and your entry reasons match your trading plan.
For example, imagine you found some good reasons to buy USDJPY pair, and you decide to open a long trade. However, checking your trading plan, you have an important rule there - the market should strictly lie on a key level.
The current market conditions do not fit your trading plan, so you skip that trade.
✔️ - The trade is in the direction with the trend
That condition is mainly addressed to the newbie traders.
Trading against the trend is much more complicated and riskier than trend-following trading, for that reason, I always recommend my students sticking with the trend.
Even though USDCHF formed a cute double bottom pattern after a strong bearish trend, and it is appealing to buy the oversold market, it is better to skip that trade because it is the position against the current trend.
✔️ - The trade has stop loss and target level
Know in advance where will be your goal for the trade and where you will close the position in a loss.
If you think that it is a good idea to buy gold now, but you have no clue how far it will go and where can be the target, do not take such a trade.
You should know your tp/sl before you open the trade.
✔️ - The trade has a good risk to reward ratio
Planning the trade, your potential reward should outweigh the potential risks. And of course, there are always the speculations about the optimal risk to reward ratio, however, try to have at least 1.3 R/R ratio.
Planning a long trade on EURNZD with a safe stop loss being below the current support and target - the local high, you can see that you get a negative r/r ratio, meaning that the potential risk is bigger than the potential reward. Such a trade is better to skip.
✔️ - I am ok with losing this trade if the market goes against me
Remember that even the best trading setups may occasionally fail. You should always be prepared for losses, and always keep in mind that 100% winning setups do not exist.
If you are not ready to lose, do not even open the position then.
✔️ - There are no important news events ahead
That rule is again primarily addressed to newbies because ahead and during the important news releases we have sudden volatility spikes.
Planning the trade, check the economic calendar, filtering top important news.
If important fundamentals are expected in the coming hours, it's better to wait until the news release first.
Taking a long trade on Gold, you should check the fundamentals first. Only after you confirm, that there are no fundamentals coming soon, you can open the position.
What I like about that checklist is that it is very simple, but you can use it whether you are a complete newbie or an experienced trader.
Try it and let me know if it helps you to improve your trading performance.
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