When i started trading i wanted to trade everyday not knowing that i might not place the right trade every time or this is not the right opportunity but the fact is when we start trading and start seeing profits we become greedy and we just wanted to jump into trading , i realized this later on when i started getting swap charges of keeping my trades open overnight for days and even weeks . i understood the fact that i am an amateur trader i should relax and enjoy it and spend more time learning it, Here is a thing i wanted to tell you if you have just started trading you should spend more time finding ZONES in the charts. I will elaborate ZONES and how to find them in this blog
Before we dig deep into understanding the concept of finding zones let me ask you a question What is trading ? I will answer this is in a Non technical terms for me its just a fight between buyers and sellers who tries to push prices and up and down taking long and short positions and who does this buying and selling , Humans right . So what i am trying to explain here is to become a good trader we need to understand the psychology of humans . History tends to repeat over and over again . so does the prices and their ZONES
Take a look at the EUR/CAD chart below
By seeing the chart we can clearly make out that whenever prices goes down and touches 1.4800 it tends to bounce back and this happened almost every time since Nov 2017 , The Orange strip on the chart is a ZONE and you can even term it as a Demand Zone , Where buyer tends to push the price up
This clearly states that history repeats , but we need to be very careful as these prices keeps on changing , new histories are being created everyday.
Lets look at another example of EUR/CAD
What you see here is just the opposite what we saw in the previous chart . Back in 2011 the price touched 1.4300 few times and tends to go down every time , we can call this red strip as supply zone
Finding these demand and supply zones ( often call as Support and resistance zones) could be very difficult sometimes but its every essential for a trader to look for it
Some basic charactersticks of zones are a follows
1. Zones are an area, not a price point.
2. Zones are like fine wine; they get better with age.
3. Zones are spots on the chart where price reverses, repeatedly.
4. Zones may be extreme highs or lows on the chart.
5. Zones are where naked traders find trading opportunities.
6. Support and resistance zones rarely need to be modified.
7. Line charts help naked traders find zones.
8. Zones are often seen by many traders.
If you have just stared trading i will seriously recommend you to start finding these zones . Here is an easy way to do so
- Pick up any 10 Forex pairs that you have recently traded or have traded in the past
- Start with a long term time frame to a short term time frame, Daily to 4 hour and then hourly chart
- Start finding support and resistance zones on these charts
- Note down how many times the prices have touched these zones
- Now compare your past trades placed to your touch points
you will be able to analyse that how far u have placed your long trade from the demand zone or vice versa . The more you practice this the more patient you will become and this will help you trade in a better manner and finding awesome trading opportunities
After this activity you will see a dramatic change in the way you think and you will see more winning trades than loosing trades and tend to trade less and win more simultaneously
Let me know in comments section below how did you feel ?
Let me know if you wanna know more about trading
Ramdan Kareem to all my Muslim friends
Stay fit , Take care