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HOW TO ESTABLISH A DIRECTIONAL BIAS IN FOREX TRADING

By Your Trading mentor,

Trading Angel

WISE WORDS BY A TRADING MENTOR

One of the most helpful pieces of advice I was given by a trading mentor was to establish a directional bias before you start your trading day. So in this blog post I’m going to be talking you through what a directional bias is, why it’s useful and how to establish one as well as some useful tools to help you decide on your directional bias and what time of day or week you should be looking for it.

A directional bias in forex trading means you have already pre-decided what direction you believe the market might move in before you place any trades. This means you can react appropriately and follow your trading plan if the market gives you the signs that you were correct. The alternative to this is having no plan because you have no idea where the market is going and can lead to impulsive and chaotic trading. For example if you decide your directional bias is for a buy position then you want to be following your trading plan and strategy in line with looking for a buy position and if you were to start noticing the market giving signs that it is moving down, rather than changing your plan and opt for a sell potion instead you would sit out the trade and observe instead.

THE POWER OF THREE

One helpful rule which I learned from the trading mentor who calls himself the mentor to your mentor, ICT or Inner Circle Trader, is to use the Power Of Three to help establish your directional bias when trading. The power of three is the journey which a candlestick or a market goes on in a 24 hour period. There are three stages which often starts with a false move in the opposite direction which allows a liquidity sweep to take place and orders to be triggered at those prices. This is then followed by the main move of the day (which is the one you want to be in as this is the one with the greatest momentum) as the day draws to a close there is often a small move back in the original direction (the opposite to the main move of the day). Obviously there are variations to this. Sometimes the main move has so much momentum that it closes with no wick however you’ll notice that most candles have a long body and a bit of wick on both sides. The wick on both sides shows the move in the opposite direction which took place either side of the main move of the day.

Now, why understanding the power of three is so crucial to establishing a directional bias is because you can use this to help give you a roadmap for your trade, in a way. Imagine if you were taking a long journey to a place you have never been before, if you looked at a map before you got in the car you would have a much better chance of correcting yourself quickly and getting back on the right track if you got lost as well as a much better chance overall of not getting lost in the first place. Understanding the power of three is like having a map of the trade which you expect to take place and if you don’t get the signals you were expecting you’ll be alert to sit out of the markets and wait and see what happens next.

One of the easiest and simplest ways to establish a direction bias is to check the market you plan on trading the day before as the markets close. I like to do this on higher time frames such as the 1D or the 1W chart to give myself a big picture view of where the market is at. Often looking on the time frame can make it very clear if you are in a long time down trend or a long term uptrend. A useful indicator which you can use is a moving average such as a 50 EMA which is a favourite of mine. If the candles on the 1W chart are above the 50 EMA then you are likely in a long term uptrend whereas if they are predominantly below the 50 EMA you are likely in a long-term downtrend. If the EMA is moving sideways and the candles are closing frequently above and below you are in a range and therefore it becomes a lot more tricky to establish a directional bias. Lets say the EMA is pointing upwards and the candles are predominantly above it we say we are in an uptrend. This means our directional bias is likely to be for a buy position. The next thing you want to do is to drop to the smaller time from of the 1D chart and see if this is in alignment. It’s possible that there could be a long term uptrend on the 1W chart but when you drop to the 1D you might be experiencing a small pullback in the market in which case you’ll want to hold fire before getting involved in a trade. A utopic situation is that the two are in alignment. Combining this with the power of three it would mean you’d expect a small move down when the markets open and then at a certain time of day (often it’s around the same time depending on what markets you trade and when the sessions are opening and closing) you’d expect a big move in the direction of your directional bias, which in this case is up. When you get the signs that the market is likely to move up you can place your buy position knowing that you are very well prepared for this trade.

USING MOMENTUM TO ESTABLISH YOUR BIAS

Another tool you can use to establish a directional bias is a momentum indictor as this can give you an idea as to what direction the long term momentum is in. Even when you are scalp trading on a very small time frame it is still important to have an idea of where you expect the main momentum of the day to be. There are many indicators you can use to gauge momentum. A popular one is the MACD or Moving Average Convergence Divergence, which has a nice colourful visual histogram. The dark green on the histogram signifies bullish momentum and the dark red signifies bearish momentum. Light green indicates a slow down in momentum to the upside and light red indicates a slow down in momentum to the downside. This is pretty useful when trying to establish if a trend is perhaps drawing to an end in which case you may not want to get involved in the trade, or use another set of rules for your direction bias. The size of the histogram on the MACD can be useful as well to give an idea of how strong the momentum is, the bigger the histogram the stronger then momentum.

Another momentum tool which I like to use is Heikin Ashi, These look very similar to normal candlesticks but uses a slightly different formular which smooths out the appearance of the trend. There are three main candlestick types when using Heikin Ashi, bullish momentum, bearish momentum and indecision. Bullish momentum Heikin Ashi candles are green and have a flat base with wick at only the top, whereas bearish momentum Heikin Ashi candles are red and have a flat top with wick at only the base. If on the weekly chart you see a green Heikin Ashi candle with a flat base and wick at only the top you could conclude you have bullish momentum and therefore your directional bias is likely to be for a buy position if this also matches on the 1D chart as well.

WHEN TO LOOK FOR YOU DIRECTIONAL BIAS

I like to use quiet times to establish my directional bias. In a way, this is almost the first step which I am doing towards planning my trade. Sunday is a great time to look at all the weekly charts and see how the charts are trending. As the financial markets are not open on the weekends this allows you to analysis the charts without feeling any pressure to get involved with a trade. This means you can be all analytical with minimal emotion. Similarly, at the end of the trading day when the markets are very quiet you can look at the daily chart to see how the candles close and decide what your directional bias is for the following day. Another great thing to do on the weekend and at the end of each trading day is to check the economical calendar so you know what’s coming up. This can also be really helpful for navigating your trading. What you’ll often notice is that if there is a big news release due out, the markets might be quite sticky and move in ranges as they await the news and then as the news is released you might find that the markets start to break out of their ranges and establish their new directional bias. If you notice that there is big news approaching and the markets are not moving in nice trends then just wait until after it is released. Also, make sure you are not in any open trades when the news is released as big economical data or news can often cause sudden and unexpected moves which might catch you out and hit your stop loss if you are already in an open trade. Examples of big news releases which you’ll want to be aware of is NFP or Non Farm Payroll, CPI or Consumer Price Index and Interest Rate Decisions. The financial markets tend to be much more reactive to any news from the Fed or America then any country so always be mindful of this. America tend to release new embargoes at 13:30 UK time so this is a key time in the day to be aware of if you are trading any market which is heavily affected by the US dollar. Often, if you have a trade which is moving nicely in the London session then it can end up moving suddenly In the opposite direction at this time. One hour later the New York Stoc Exchange then opens which again can cause big moves in the markets.

Remember as well when looking out for new releases, that the global financial markets have a very holistic relationship with each other and often a big move in one market can have a ripple effect on the others. For example, the indices all tend to mimic each other so if one has a sudden drop the others often tend to follow suit. So if you look for news releases which you think will only affect one specific market, just remember that if it is big news and if it has a big impact then it might send ripples through the rest of the market.

NEED A TRADING MENTOR?

If you’d like any help in your trading journey and creating a comprehensive trading plan and strategy then Trading Angel has a trading course which teaches a step by step guide to placing a trade which is designed to save you as much time as possible in your journey learning to trade. The trading mentorship programme is very popular and spaces are limited but if you would like to apply to be added to the waitlist to have yourself a 1-2-1 trading mentor then you can use the contact form on the website www.trading.angel.co.uk or email info@tradingangel.co.uk. Having a trading mentor is one of the best tracking hacks as it will save you a lot of time and money in trial and error. I self-taught at the start of my trading journey and with reflection I should have probably invested in a trading mentor sooner. However as this can often be an unaffordable option for many I will be here updating blog posts each week and uploading new YouTube videos each week to help save you as much time as possible on your trading journey

https://www.youtube.com/@Trading_Angel

Happy Trading

Love From, Your Trading Mentor x 

Read More

HOW TO TURN ANY LOSS IN FOREX INTO A WIN 

By Your Trading Coach

Trading Angel

NO ONE’S CALLING THOMAS EDISON A FAILURE RIGHT? 

Have you ever heard the saying that there are no mistakes, just data collection. I think Thomas Edison famously made 1,000 failed attempts to create a light bulb and declared he didn’t fail he just learned a load of ways not to do it in the process. I’m fairly certain the majority of us only remember him for his great success. Yet for some reason when it comes to forex trading, everyone seems to expect that they are to become an expert profitable trader straight away in their first year. You will make a lot of mistakes when you first start trading forex because it’s just part of the course of learning something which is new. Have you ever started any new job at all and made no mistakes?? 

But obviously you do want to make as few mistakes as possible and the ones you do make you want to keep them as small as possible, as your hard earned money is on the line here. 

So here is how you can turn any losing trade in forex into a win:

Ask yourself two questions

What did I do wrong? 

What can I do different next time? 

And then, once you have established the answers to these questions you suddenly have a lesson which you would likely have paid a trading coach for. So just think of the loss you made on the trade as an investment in the lesson and make sure you don’t make the same mistake again!! 

I always say that the trade is not over when the trade is closed, the trade is over when you have finished reviewing the trade. 

On this topic, one of the best and quickest ways to improve your forex trading, is undoubtably to keep a forex trading journal. The same principle applies as you are keeping a note of the trades you placed and keeping note of what went wrong so you can avoid doing this next time. BUT also, I think it’s really important to look at what you are doing right as well. Because not only can you learn what not to do next time from your loses, but you can also learn what you want to do MORE of from your wins. 

There are a few columns I like to have in my trading journal such as time opened, time closed, opening notes, closing notes, as well as the obvious things like which strategy you followed, which forex pair you traded and in which direction. The reason I like to pay close attention to when the trade was opened and closed is because this can help give you clues as to whether you are making more money at certain times of day or in certain trading sessions. You can also add categories such as what time frame you were trading on or if you let the stop loss hit or the take profit, or if you actually closed your trade manually. 

While none of this information is particularly exciting for each isolated trade, once you’ve placed about 50 or even 100 trades, you will start to see patterns and clues creeping in making suggestions as to what you should be doing more (or less) of. Having a trading journal is like having your very own trading mentor! 

I created my trading journal on Google Sheets, and it’s got some cool features such as the pips lost or gained column which is formatted to turn green for a win and red for a loss and all my wins and losses get added up on the bottom line which again automatically turns red for a loss or green for a win. I also use a lot of drop down menus to make it really easy to fill out. The more tedious something is, the less likely I am to actually do it, so these help keep the process quick and easy. 

If you’d to watch a video tutorial on how I created my trading journal on Google Sheets then you can click this link and watch a YouTube video which I recently made

Happy Trading! 

Love from your Trading Coach x 

Read More

HOW TO TURN ANY LOSS IN FOREX INTO A WIN 

By Your Trading Mentor 

Trading Angel

NO ONE’S CALLING THOMAS EDISON A FAILURE RIGHT? 

Have you ever heard the saying that there are no mistakes, just data collection. I think Thomas Edison famously made 1,000 failed attempts to create a light bulb and declared he didn’t fail he just learned a load of ways not to do it in the process. I’m fairly certain the majority of us only remember him for his great success. Yet for some reason when it comes to forex trading, everyone seems to expect that they are to become an expert profitable trader straight away in their first year. You will make a lot of mistakes when you first start trading forex because it’s just part of the course of learning something which is new. Have you ever started any new job at all and made no mistakes?? 

But obviously you do want to make as few mistakes as possible and the ones you do make you want to keep them as small as possible, as your hard earned money is on the line here. 

So here is how you can turn any losing trade in forex into a win:

Ask yourself two questions

What did I do wrong? 

What can I do different next time? 

And then, once you have established the answers to these questions you suddenly have a lesson which you would likely have paid a trading mentor for. So just think of the loss you made on the trade as an investment in the lesson and make sure you don’t make the same mistake again!! 

I always say that the trade is not over when the trade is closed, the trade is over when you have finished reviewing the trade. 

On this topic, one of the best and quickest ways to improve your forex trading, is undoubtably to keep a forex trading journal. The same principle applies as you are keeping a note of the trades you placed and keeping note of what went wrong so you can avoid doing this next time. BUT also, I think it’s really important to look at what you are doing right as well. Because not only can you learn what not to do next time from your loses, but you can also learn what you want to do MORE of from your wins. 

There are a few columns I like to have in my trading journal such as time opened, time closed, opening notes, closing notes, as well as the obvious things like which strategy you followed, which forex pair you traded and in which direction. The reason I like to pay close attention to when the trade was opened and closed is because this can help give you clues as to whether you are making more money at certain times of day or in certain trading sessions. You can also add categories such as what time frame you were trading on or if you let the stop loss hit or the take profit, or if you actually closed your trade manually. 

While none of this information is particularly exciting for each isolated trade, once you’ve placed about 50 or even 100 trades, you will start to see patterns and clues creeping in making suggestions as to what you should be doing more (or less) of. Having a trading journal is like having your very own trading mentor! 

I created my trading journal on Google Sheets, and it’s got some cool features such as the pips lost or gained column which is formatted to turn green for a win and red for a loss and all my wins and losses get added up on the bottom line which again automatically turns red for a loss or green for a win. I also use a lot of drop down menus to make it really easy to fill out. The more tedious something is, the less likely I am to actually do it, so these help keep the process quick and easy. 

If you’d to watch a video tutorial on how I created my trading journal on Google Sheets then you can click this link and watch a YouTube video which I recently made

Happy Trading! 

Love from your Trading Mentor x 

Read More

DO WOMEN MAKE BETTER FOREX TRADERS?

By Your Trading Coach,

Trading Angel 

HAPPY INTERNATIONAL WOMEN’S DAY 2024!!

March 8th celebrates International Women’s Day and with females in finance being a hot topic and my speciality, I thought it would be fun to do a deep dive into the question, probably only women are asking, and that is ‘do women make better traders than men?’

Just to preface this, I’m all about equality and am not a crazy feminist, I have a great relationship with my father, I have a male partner who is the most intelligent and supportive person I know, and have loving respect for all the wonderful contributions men make in this world. But for International Women’s Day let’s take a moment to celebrate women today. 

THE WORST GENDER PAY GAP IN THE UK 

Females in finance is a hot topic because while the UK has made great progress in narrowing the gender inequality gap in many areas, finance is actually one where there is still a relatively sizeable gap. The data suggests that the number of women in financial services in the UK has been growing. Apparently 43% of the workforce in 2019 was women BUT the figures also suggest that significantly fewer of them are in leadership roles, executive or board positions. Reportedly only 15% of finance directors in the UK’s FTSE 100 companies are women. And as you can imagine in the finance sector, the divide in pay between those at the top of companies and those in more supportive roles, is huge. This means that consequently, the pay gap between men and women in finance in the UK is very significant. In 2021 it was reported that in the UK the finance sector actually had the WORST gender pay gap. 

Having said all of this, the world is changing and there are now new ways women can work within finance. For example, I am a retail trader and a trading mentor, which means I trade from home and I teach others to trade on Zoom. This is an incredibly flexible position for me and there aren’t many barriers, other than reputation, which would prevent me from being in work. And I see many other women online who are choosing to take this path too, which is wonderful. Last year I was interviewed on the subject of being a female in the finance sector and I was asked if I felt like there were barriers for me and if I needed to work harder then men to be taken seriously. I answered, honestly, that no I did not feel this. It’s possible that I do have to work harder I’m just not aware of it, but it’s also possible that because I work from home and for myself, the same barriers which other women experience don’t necessarily apply to me. If I was trying to get a job in a bank in London, for example, I might start to experience some of the sexism I hear comes with the territory. But for me, working from home as a retail trader and mentor at my trading desk, I’m for the most part, blissfully unaware. 

As part of International Women’s Day I have been invited by the broker XTB to take part in an annual event which they are putting on. This year they are focusing on women in trading and I’ll be joining a panel of females in finance to discuss if women do make better traders than men and the various stereotypes for women in trading. We are also going to be looking at what is possibly holding women back from learning to trade, and what can be done to try and encourage more women to get into trading. 

DON’T LET THEM KNOW YOU’RE INTERESTED IN MONEY

This made me reflect on my own personal journey with finance. I remember always being interested in finance and business at school but I had a bad experience when I tried to express this as a teenager and the reaction I received put me off being open about this afterwards. I was about 15 or 16 and we were talking about various career options at school. I’d heard a few of the boys in my class talking about wanting to work in finance. I thought this sounded interesting too. One of our teachers was encouraging us to reach for the stars and believe anything is possible and in doing this asked us a series of questions which we needed to share with the class. One of the questions was to name something which interested us. Inspired by the conversations about finance the boys had been having, I realised that understanding money interested me too, learning about how some people were able to manage their money in a way in which it grew interested me, being financially savvy and understanding how the financial markets worked interested me. But as I was very young, I wasn’t articulate enough to express this quite like that, I just replied that ‘money’ interested me. And the whole class, altogether rolled their eyes and told me with disgust that I was pathetic. I believe a couple of the boys in that class have now grown up to work in finance. I was never quite sure why it was a respectable job for them to talk about wanting, but when I said it, I was pathetic. I think, with reflection, saying you are interested in ‘money’ people find jarring but if you say ‘finance’ it is suddenly acceptable. Not understanding this at the time I just noted that I wasn’t supposed to talk about an interest in money and went down the path of least resistance in media studies. 

When I expressed an interest in trading later on in my teens I was told that traders died young because of the stress so I thought that probably didn’t sound worth being rich if I wasn’t going to live long enough to spend my money. All in all, I let the opinions and reactions of other people put me off doing what I wanted to do and only really came back around to finance (not money) later on in my life. And a pretty sizeable regret of mine is that I didn’t revisit the idea sooner. To be honest, trading isn’t quick to learn. There’s a lot of information and multitasking and I often liken it to juggling spinning plates. I wish I’d started learning sooner so I would have had the information sooner. Hindsight is always 20/20. 

HOW DO WOMEN INVEST? 

Is there a difference between the way women invest and how men invest? According to data by XTB the answer is ‘yes’. It seems there is a slight difference in the age of the average investor. Women are typically a bit older with the average age being 37, whereas for men it is 35. The way in which we invest is also seemingly different. Women tend to opt for desktops or computers while men seems to prefer using mobile devices. The analysis behind these differences has been put down to the fact that women typically take a bit longer to make decisions than men do, which means they are happier to opt for slower devices. Men on the other hand prefer to make quick decisions. Women typically seek advice from peers or experts whereas men often don’t ask for anyones opinion. This was the analysis from experts from the Koszalin University of Technology. 

To be completely honest, in my experience working as a trading mentor I have worked alongside many men and women so it would be difficult for me to say if I believe this is true or not as the people who come to me for help are always seeking my opinion anyway, therefore I’m frequently getting asked for my opinion by men AND women. I have worked with over 100 traders one to one and the divide is roughly 60% men to 40% women. So I would say there isn’t too much in it from my experience, however I understand that I have only worked with a very small cross section of the overall population. Having worked as a trading mentor for a few years now and having encountered many female traders, here is a list of the qualities which I have found women typically have which make them great at trading forex. 

WOMEN ARE GREAT PLANNERS 

This is a great transferable skill which makes women excellent at planning events in their personal lives and also planning trades when they are forex traders. Planning a trade is a key skill to being a successful trader. All good traders need a trading plan!

WOMEN PAY GREAT ATTENTION TO DETAIL 

We like attention to detail in many areas of life and this is why we are great at designing and making things look beautiful and why, in trading, we are great at putting a lot of time and care into making sure our trade is just right. 

WOMEN SEEM TO LIKE HOMEWORK 

I’m not going to say they all love homework but I’ve noticed a lot of my female mentees are pretty keen to be given tasks to do during the week between mentoring sessions. They seem to like learning and having the opportunity to grow and develop in their own time as well as in the trading classes. 

WOMEN ARE GREAT AT REFLECTING WHEN THEY HAVE MADE A MISTAKE 

This is important in trading. We all make mistakes, especially when we are brand new beginner traders. In fact, I‘ve heard some people refer to forex traders as professional losers! It’s important to be able to take loses and learn from them. In my experience of mentoring female traders, I would say that women are great at reflection when they have made a mistake, taking ownership and accountability of it and looking forward to what needs to be done to not make the same mistake again. This quality will take you a long way as a forex trader. 

WOMEN LIKE TO TAKE THEIR TIME TO DO THINGS PROPERLY 

As we have learned from the data from XTB, women like to take their time and to think through their investments before jumping in. They like to consult on their peers, or experts and make slow and thoughtful decisions. This is an excellent quality for a forex trader. One thing I have learned from my time trading forex is that sometimes the best trades take weeks to plan. Often the best set ups mean you are watching the market for ages waiting for the perfect snipper entry. Often when people regret their trading decisions it is because they went in too quickly and didn’t take enough time to think through everything which might go wrong. 

WOMEN ARE INTELLIGENT 

So I did a bit of research on this one to see if there were any studies done on the IQ of men and women and it seems that overall the average IQ between the two evens out. Seemingly more women hover around the 100 point whereas the spectrum seems to be a bit wider between men. So I couldn’t say either is more or less intelligent but women are certainly no less on average and shouldn’t be told otherwise.

WOMEN HAVE A HIGH THRESHOLD FOR PAIN 

And if you’ve ever lost a trade, you’ll know why this is needed!!

So, now we know women can make excellent traders (I wouldn’t be bold enough to say ‘better’ as I don’t have quantitative data for this) what are the repercussions of not having more women in finance roles in the UK? 

Firstly, studies suggest that companies with more diverse workforces perform better, are more innovative and productive. These workforces, needless to say, also promote inclusivity. 

Gender balance and diversity can also help lead to more creativity, greater empathy with clients (which can in tern lead to company growth and profits) and all of these can also lead to greater job satisfaction. 

If you’re a woman who is interested in learning forex trading then send me an email at info@tradingangel.co.uk with the title IWD23 for a special 20% discount on the Trading Angel trading course as part of international women’s day 2024. 

Happy Trading, 

Love From, Your Trading Coach x 

Read More

DO WOMEN MAKE BETTER FOREX TRADERS?

By Your Trading Mentor,

Trading Angel 

HAPPY INTERNATIONAL WOMEN’S DAY 2023!!

March 8th celebrates International Women’s Day and with females in finance being a hot topic and my speciality, I thought it would be fun to do a deep dive into the question, probably only women are asking, and that is ‘do women make better traders than men?’

Just to preface this, I’m all about equality and am not a crazy feminist, I have a great relationship with my father, I have a male partner who is the most intelligent and supportive person I know, and have loving respect for all the wonderful contributions men make in this world. But for International Women’s Day let’s take a moment to celebrate women today. 

THE WORST GENDER PAY GAP IN THE UK 

Females in finance is a hot topic because while the UK has made great progress in narrowing the gender inequality gap in many areas, finance is actually one where there is still a relatively sizeable gap. The data suggests that the number of women in financial services in the UK has been growing. Apparently 43% of the workforce in 2019 was women BUT the figures also suggest that significantly fewer of them are in leadership roles, executive or board positions. Reportedly only 15% of finance directors in the UK’s FTSE 100 companies are women. And as you can imagine in the finance sector, the divide in pay between those at the top of companies and those in more supportive roles, is huge. This means that consequently, the pay gap between men and women in finance in the UK is very significant. In 2021 it was reported that in the UK the finance sector actually had the WORST gender pay gap. 

Having said all of this, the world is changing and there are now new ways women can work within finance. For example, I am a retail trader and a trading mentor, which means I trade from home and I teach others to trade on Zoom. This is an incredibly flexible position for me and there aren’t many barriers, other than reputation, which would prevent me from being in work. And I see many other women online who are choosing to take this path too, which is wonderful. Last year I was interviewed on the subject of being a female in the finance sector and I was asked if I felt like there were barriers for me and if I needed to work harder then men to be taken seriously. I answered, honestly, that no I did not feel this. It’s possible that I do have to work harder I’m just not aware of it, but it’s also possible that because I work from home and for myself, the same barriers which other women experience don’t necessarily apply to me. If I was trying to get a job in a bank in London, for example, I might start to experience some of the sexism I hear comes with the territory. But for me, working from home as a retail trader and mentor at my trading desk, I’m for the most part, blissfully unaware. 

As part of International Women’s Day I have been invited by the broker XTB to take part in an annual event which they are putting on. This year they are focusing on women in trading and I’ll be joining a panel of females in finance to discuss if women do make better traders than men and the various stereotypes for women in trading. We are also going to be looking at what is possibly holding women back from learning to trade, and what can be done to try and encourage more women to get into trading. 

DON’T LET THEM KNOW YOU’RE INTERESTED IN MONEY

This made me reflect on my own personal journey with finance. I remember always being interested in finance and business at school but I had a bad experience when I tried to express this as a teenager and the reaction I received put me off being open about this afterwards. I was about 15 or 16 and we were talking about various career options at school. I’d heard a few of the boys in my class talking about wanting to work in finance. I thought this sounded interesting too. One of our teachers was encouraging us to reach for the stars and believe anything is possible and in doing this asked us a series of questions which we needed to share with the class. One of the questions was to name something which interested us. Inspired by the conversations about finance the boys had been having, I realised that understanding money interested me too, learning about how some people were able to manage their money in a way in which it grew interested me, being financially savvy and understanding how the financial markets worked interested me. But as I was very young, I wasn’t articulate enough to express this quite like that, I just replied that ‘money’ interested me. And the whole class, altogether rolled their eyes and told me with disgust that I was pathetic. I believe a couple of the boys in that class have now grown up to work in finance. I was never quite sure why it was a respectable job for them to talk about wanting, but when I said it, I was pathetic. I think, with reflection, saying you are interested in ‘money’ people find jarring but if you say ‘finance’ it is suddenly acceptable. Not understanding this at the time I just noted that I wasn’t supposed to talk about an interest in money and went down the path of least resistance in media studies. 

When I expressed an interest in trading later on in my teens I was told that traders died young because of the stress so I thought that probably didn’t sound worth being rich if I wasn’t going to live long enough to spend my money. All in all, I let the opinions and reactions of other people put me off doing what I wanted to do and only really came back around to finance (not money) later on in my life. And a pretty sizeable regret of mine is that I didn’t revisit the idea sooner. To be honest, trading isn’t quick to learn. There’s a lot of information and multitasking and I often liken it to juggling spinning plates. I wish I’d started learning sooner so I would have had the information sooner. Hindsight is always 20/20. 

HOW DO WOMEN INVEST? 

Is there a difference between the way women invest and how men invest? According to data by XTB the answer is ‘yes’. It seems there is a slight difference in the age of the average investor. Women are typically a bit older with the average age being 37, whereas for men it is 35. The way in which we invest is also seemingly different. Women tend to opt for desktops or computers while men seems to prefer using mobile devices. The analysis behind these differences has been put down to the fact that women typically take a bit longer to make decisions than men do, which means they are happier to opt for slower devices. Men on the other hand prefer to make quick decisions. Women typically seek advice from peers or experts whereas men often don’t ask for anyones opinion. This was the analysis from experts from the Koszalin University of Technology. 

To be completely honest, in my experience working as a trading mentor I have worked alongside many men and women so it would be difficult for me to say if I believe this is true or not as the people who come to me for help are always seeking my opinion anyway, therefore I’m frequently getting asked for my opinion by men AND women. I have worked with over 100 traders one to one and the divide is roughly 60% men to 40% women. So I would say there isn’t too much in it from my experience, however I understand that I have only worked with a very small cross section of the overall population. Having worked as a trading mentor for a few years now and having encountered many female traders, here is a list of the qualities which I have found women typically have which make them great at trading forex. 

WOMEN ARE GREAT PLANNERS 

This is a great transferable skill which makes women excellent at planning events in their personal lives and also planning trades when they are forex traders. Planning a trade is a key skill to being a successful trader. All good traders need a trading plan!

WOMEN PAY GREAT ATTENTION TO DETAIL 

We like attention to detail in many areas of life and this is why we are great at designing and making things look beautiful and why, in trading, we are great at putting a lot of time and care into making sure our trade is just right. 

WOMEN SEEM TO LIKE HOMEWORK 

I’m not going to say they all love homework but I’ve noticed a lot of my female mentees are pretty keen to be given tasks to do during the week between mentoring sessions. They seem to like learning and having the opportunity to grow and develop in their own time as well as in the trading classes. 

WOMEN ARE GREAT AT REFLECTING WHEN THEY HAVE MADE A MISTAKE 

This is important in trading. We all make mistakes, especially when we are brand new beginner traders. In fact, I‘ve heard some people refer to forex traders as professional losers! It’s important to be able to take loses and learn from them. In my experience of mentoring female traders, I would say that women are great at reflection when they have made a mistake, taking ownership and accountability of it and looking forward to what needs to be done to not make the same mistake again. This quality will take you a long way as a forex trader. 

WOMEN LIKE TO TAKE THEIR TIME TO DO THINGS PROPERLY 

As we have learned from the data from XTB, women like to take their time and to think through their investments before jumping in. They like to consult on their peers, or experts and make slow and thoughtful decisions. This is an excellent quality for a forex trader. One thing I have learned from my time trading forex is that sometimes the best trades take weeks to plan. Often the best set ups mean you are watching the market for ages waiting for the perfect snipper entry. Often when people regret their trading decisions it is because they went in too quickly and didn’t take enough time to think through everything which might go wrong. 

WOMEN ARE INTELLIGENT 

So I did a bit of research on this one to see if there were any studies done on the IQ of men and women and it seems that overall the average IQ between the two evens out. Seemingly more women hover around the 100 point whereas the spectrum seems to be a bit wider between men. So I couldn’t say either is more or less intelligent but women are certainly no less on average and shouldn’t be told otherwise.

WOMEN HAVE A HIGH THRESHOLD FOR PAIN 

And if you’ve ever lost a trade, you’ll know why this is needed!!

So, now we know women can make excellent traders (I wouldn’t be bold enough to say ‘better’ as I don’t have quantitative data for this) what are the repercussions of not having more women in finance roles in the UK? 

Firstly, studies suggest that companies with more diverse workforces perform better, are more innovative and productive. These workforces, needless to say, also promote inclusivity. 

Gender balance and diversity can also help lead to more creativity, greater empathy with clients (which can in tern lead to company growth and profits) and all of these can also lead to greater job satisfaction. 

If you’re a woman who is interested in learning forex trading then send me an email at info@tradingangel.co.uk with the title IWD23 for a special 20% discount on the Trading Angel trading course as part of international women’s day 2023. 

Happy Trading, 

Love From, Your Trading Mentor x 

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SHOULD I START TRADING ON A DEMO ACCOUNT AT FIRST? 

By Your Trading Coach

Trading Angel 

I TRADED ON A DEMO ACCOUNT FOR ABOUT A WEEK 

I was told it was a good idea to trade on a demo account for several months before moving onto a live trading account. This is good advice but I didn’t listen to it. To be honest I got bored on a demo account and I really didn’t learn much about trading until I put real money on the line. But having said that I also self taught and didn’t have a trading mentor to tell me the correct approach. So this is what I tell my trading students and what I wish someone had told me when I first started trading forex.

DEMO ACCOUNTS ARE COMPLETELY DIFFERENT TO LIVE ACCOUNTS BUT THEY DO HAVE THEIR PLACE 

There is a well known phenomena in forex trading where everyone seems to make thousands of pounds with no problem on a demo trading account which leads them believe they are the best trader in the world, and then as soon as they switch to live trading with hopeful enthusiasm they end up losing all their money because they weren’t quite prepared for how big a role trading psychology plays in your ability to trade well. There is an excellent book on this subject called Trading In The Zone which i’ll amazon link here 

https://amzn.to/3Y0GrbQ

but if you can’t be bothered to read a whole book then the summery is basically that the trick to making money as a forex trader is to not care about money and to focus on trading well instead. Ironically most traders when they first start trading actually care the most about making money, it’s what made them decide to be a trader in the first place. They were so confident when it was pretend demo money and then as soon as it was their life savings, the trader fear kicked in and suddenly they started second guessing every trade, closing it early, the second it fluctuated in the opposite direction, only to watch it go back the way they originally thought it was going as soon as it was closed at a loss. Ever been here? If you answered ‘no’ you’re probably still trading on demo. 

DEMO TRADING IS GOOD FOR NAVIGATION

So while a demo trading account doesn’t actually prepare you for certain elements of trading psychology, what it does do very nicely is to give you practice navigating your way around a trading platform. Sometimes these can seem confusing at first. I use MetaTrader which I now find super easy but I can remember the day when I was tearing my hair out thinking it was the most complicated thing in the world. You definitely don’t want to be going through this while you have real money on the line. You want to be fully fluent in the platform you use, knowing exactly how to adjust the lot sizes when needed, where to place your stop loss and take profit and exactly how to close the trade. You also want to be able see all the trades you have closed, your profit and loss and how to add currency pairs to you watchlist. 

ALWAYS DEVELOP NEW STRATEGIES ON DEMO ACCOUNTS 

Not only do you want to be fully fluent in the trading platform you are using before you switch from demo trading to live trading but you also want to be happy with your strategy on demo first. This is the stage which I missed out and I wish I’d taken a bit more time and care over. I tested out my strategy on a live account which pretty much meant I lost all of my money, because that’s what happens when you develop your own strategy. Even when you are trading a pre-tested strategy which your trading mentor has given you, its still advisable to start off on demo. There are so many nuances in trading and it’s just far safer to have a couple test drives with play money first. 

NOTHING BEATS THE REAL THING 

Having said all of this, if you tell me you are bored on demo and it feels like it doesn’t mean anything to you and you’re not learning, I do understand. This is exactly how I felt as well. While it’s clever to spend a bit of time on a demo trading account I do honestly believe there is such a thing as spending too long on one. Nothing is going to make you pay attention to the way the financial markets moves quite like having real money at stake, even if its the smallest lot size possible and the trade has only gone £2 against you, you will still be paying attention and staring at those candles intensely as they move up and down. 

Happy Trading! 

Love from your Trading Coach x

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SHOULD I START TRADING ON A DEMO ACCOUNT AT FIRST? 

By Your Trading Mentor

Trading Angel 

I TRADED ON A DEMO ACCOUNT FOR ABOUT A WEEK 

I was told it was a good idea to trade on a demo account for several months before moving onto a live trading account. This is good advice but I didn’t listen to it. To be honest I got bored on a demo account and I really didn’t learn much about trading until I put real money on the line. But having said that I also self taught and didn’t have a trading mentor to tell me the correct approach. So this is what I tell my trading students and what I wish someone had told me when I first started trading forex.

DEMO ACCOUNTS ARE COMPLETELY DIFFERENT TO LIVE ACCOUNTS BUT THEY DO HAVE THEIR PLACE 

There is a well known phenomena in forex trading where everyone seems to make thousands of pounds with no problem on a demo trading account which leads them believe they are the best trader in the world, and then as soon as they switch to live trading with hopeful enthusiasm they end up losing all their money because they weren’t quite prepared for how big a role trading psychology plays in your ability to trade well. There is an excellent book on this subject called Trading In The Zone which i’ll amazon link here 

https://amzn.to/3Y0GrbQ

but if you can’t be bothered to read a whole book then the summery is basically that the trick to making money as a forex trader is to not care about money and to focus on trading well instead. Ironically most traders when they first start trading actually care the most about making money, it’s what made them decide to be a trader in the first place. They were so confident when it was pretend demo money and then as soon as it was their life savings, the trader fear kicked in and suddenly they started second guessing every trade, closing it early, the second it fluctuated in the opposite direction, only to watch it go back the way they originally thought it was going as soon as it was closed at a loss. Ever been here? If you answered ‘no’ you’re probably still trading on demo. 

DEMO TRADING IS GOOD FOR NAVIGATION

So while a demo trading account doesn’t actually prepare you for certain elements of trading psychology, what it does do very nicely is to give you practice navigating your way around a trading platform. Sometimes these can seem confusing at first. I use MetaTrader which I now find super easy but I can remember the day when I was tearing my hair out thinking it was the most complicated thing in the world. You definitely don’t want to be going through this while you have real money on the line. You want to be fully fluent in the platform you use, knowing exactly how to adjust the lot sizes when needed, where to place your stop loss and take profit and exactly how to close the trade. You also want to be able see all the trades you have closed, your profit and loss and how to add currency pairs to you watchlist. 

ALWAYS DEVELOP NEW STRATEGIES ON DEMO ACCOUNTS 

Not only do you want to be fully fluent in the trading platform you are using before you switch from demo trading to live trading but you also want to be happy with your strategy on demo first. This is the stage which I missed out and I wish I’d taken a bit more time and care over. I tested out my strategy on a live account which pretty much meant I lost all of my money, because that’s what happens when you develop your own strategy. Even when you are trading a pre-tested strategy which your trading mentor has given you, its still advisable to start off on demo. There are so many nuances in trading and it’s just far safer to have a couple test drives with play money first. 

NOTHING BEATS THE REAL THING 

Having said all of this, if you tell me you are bored on demo and it feels like it doesn’t mean anything to you and you’re not learning, I do understand. This is exactly how I felt as well. While it’s clever to spend a bit of time on a demo trading account I do honestly believe there is such a thing as spending too long on one. Nothing is going to make you pay attention to the way the financial markets moves quite like having real money at stake, even if its the smallest lot size possible and the trade has only gone £2 against you, you will still be paying attention and staring at those candles intensely as they move up and down. 

Happy Trading! 

Love from your Trading Mentor x

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DO YOU HAVE TO BE GOOD AT MATHS TO BE A FOREX TRADER? 

By Your Trading Coach

Trading Angel 

MY MATHS IS PROBABLY SLIGHTLY BETTER THAN AVERAGE – BUT NOT BY MUCH 

One of the questions I get asked the most as a forex trading coach is if you have to be really good at maths to be a forex trader. This is one of the limiting beliefs which stops a lot of people actually starting to trade forex in the first place. To be honest, I’m ok at maths, but keep reading if you’re not because I don’t actually think being a maths genius is as important as you may think it is in forex trading. To paint a full picture of my maths ability I got an A at GCSE (not an A* like my sister who is an actual maths genius and went on to take an A-Level in maths) When I declared I was going to take maths for A-Level because I’d found it relatively easy up to that point in my life, my teacher told me that I’d probably peaked at GCSE and not to bother because I probably wouldn’t get very far with it. My sister found this hilarious. I was more relieved then disappointed and any formal training in maths ended there at the age of 16. I can add, subtract, multiply and divide very basic small numbers but don’t throw any weird numbers my way unless you have a calculator, a pen and paper and several minutes on your hands. 

LEARNING FANCY EQUATIONS IN FOREX IS A WASTE OF TIME 

It may look like there is a lot of numbers involved in forex trading but the truth is you don’t actually need to do any complicated equations with them. The big decision which you need to make when forex trading is whether to buy or sell (or sit on your hands) and that’s based on whether you think the market is going to go up or down. One of my very first ever mentees got very flustered and tearful one day while she was desperately trying to figure out the pip value of every single forex pair each time it changed value, and I cannot emphasise enough how completely unnecessary it is to do this. I introduced her to a wonderful tool called a pip calculator and she’s never asked me how to do that pointless equation again. For the record, I use an online pip calculator which is free and easy to use, link below (no affiliation) but there are also plenty of apps available, I believe one called Stinu is very popular for calculating the pip value of a currency pair. 

https://www.forextime.com/uk/trading-tools/trading-calculator/pip-calculator

PLACING A TRADE IS NOT LIKE A MATHS EXAM AT SCHOOL 

So as I mentioned, your main job as a forex trader is to decide if the market is going up or down and if you want to buy or sell, it is not to figure out the exact pip value of every single forex pair every time it moves up or down. AND there are pip calculators available AND you’re allowed to use them because funnily enough, the fact that you were terrible at maths at school and failed your exam when you weren’t allowed to use your calculator, doesn’t mean much in the real world of forex trading, because you are allowed to use a calculator. I actually encourage it!!

SOME BASIC MATHS IS A PLUS (pun intended) 

While its not essential to getting the direction right when placing a trade, some basic maths ability is useful when figuring out stop losses, take profits and also recording the information in your trading journal and then reflecting on this information. If you genuinely find it impossible to add or subtract 20 or 50 then you may struggle with figuring out some aspects of risk management. For example, if you know that you want to place your stop loss 52 pips away from entry on a sell position on EURUSD and the current price is 1.0579 then that means your stop loss goes at 1.0631. My top tip if you struggle with these sort of sums is to just remove the decimal place when putting it in your calculator and type in 10579 plus 52. If you wanted your take profit to go 3 times the distance of your stop loss away from entry giving you a risk to reward ration of 1:3 then you would multiply 52 by 3 giving you 156 and then you would take this number away from 10579 giving you 10423 so your take proft goes at 1.0423. Don’t worry I used a calculater on this and double checked the chart, no maths was done in my head. You also have the option of using a really clever little tool in TradingView called the position tool and for this is will actually do the maths for you by showing you were your stop loss and take profit go. By the way if you are new to trading then I couldn’t recommend TradingView enough for the place to do all of your charting and analysis, I’ve been using it since day one and have never looked back. Best thing is you can use it for free as long as you don’t mind the incessant pop ups, or if you want to trial the Pro version (about £11 a month) you can test it out for a month for free and cancel if you don’t like it using this link: 

https://www.tradingview.com/?offer_id=10&aff_id=25988

So, to conclude, you definitely don’t need to be a maths genius in order to be a forex trader so if that is what’s holding you back you can rule it out as an excuse now! Some basic maths does help so if you are genuinely terrible and struggle with basic sums you may find setting stop losses and profits a little bit tricky at first but even then you’ll probably get used to this side of things with a bit of practice. 

Happy Trading! 

Love from, Your Trading Coach x

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DO YOU HAVE TO BE GOOD AT MATHS TO BE A FOREX TRADER? 

By Your Trading Mentor 

Trading Angel 

MY MATHS IS PROBABLY SLIGHTLY BETTER THAN AVERAGE – BUT NOT BY MUCH 

One of the questions I get asked the most as a forex trading mentor is if you have to be really good at maths to be a forex trader. This is one of the limiting beliefs which stops a lot of people actually starting to trade forex in the first place. To be honest, I’m ok at maths, but keep reading if you’re not because I don’t actually think being a maths genius is as important as you may think it is in forex trading. To paint a full picture of my maths ability I got an A at GCSE (not an A* like my sister who is an actual maths genius and went on to take an A-Level in maths) When I declared I was going to take maths for A-Level because I’d found it relatively easy up to that point in my life, my teacher told me that I’d probably peaked at GCSE and not to bother because I probably wouldn’t get very far with it. My sister found this hilarious. I was more relieved then disappointed and any formal training in maths ended there at the age of 16. I can add, subtract, multiply and divide very basic small numbers but don’t throw any weird numbers my way unless you have a calculator, a pen and paper and several minutes on your hands. 

LEARNING FANCY EQUATIONS IN FOREX IS A WASTE OF TIME 

It may look like there is a lot of numbers involved in forex trading but the truth is you don’t actually need to do any complicated equations with them. The big decision which you need to make when forex trading is whether to buy or sell (or sit on your hands) and that’s based on whether you think the market is going to go up or down. One of my very first ever mentees got very flustered and tearful one day while she was desperately trying to figure out the pip value of every single forex pair each time it changed value, and I cannot emphasise enough how completely unnecessary it is to do this. I introduced her to a wonderful tool called a pip calculator and she’s never asked me how to do that pointless equation again. For the record, I use an online pip calculator which is free and easy to use, link below (no affiliation) but there are also plenty of apps available, I believe one called Stinu is very popular for calculating the pip value of a currency pair. 

https://www.forextime.com/uk/trading-tools/trading-calculator/pip-calculator

PLACING A TRADE IS NOT LIKE A MATHS EXAM AT SCHOOL 

So as I mentioned, your main job as a forex trader is to decide if the market is going up or down and if you want to buy or sell, it is not to figure out the exact pip value of every single forex pair every time it moves up or down. AND there are pip calculators available AND you’re allowed to use them because funnily enough, the fact that you were terrible at maths at school and failed your exam when you weren’t allowed to use your calculator, doesn’t mean much in the real world of forex trading, because you are allowed to use a calculator. I actually encourage it!!

SOME BASIC MATHS IS A PLUS (pun intended) 

While its not essential to getting the direction right when placing a trade, some basic maths ability is useful when figuring out stop losses, take profits and also recording the information in your trading journal and then reflecting on this information. If you genuinely find it impossible to add or subtract 20 or 50 then you may struggle with figuring out some aspects of risk management. For example, if you know that you want to place your stop loss 52 pips away from entry on a sell position on EURUSD and the current price is 1.0579 then that means your stop loss goes at 1.0631. My top tip if you struggle with these sort of sums is to just remove the decimal place when putting it in your calculator and type in 10579 plus 52. If you wanted your take profit to go 3 times the distance of your stop loss away from entry giving you a risk to reward ration of 1:3 then you would multiply 52 by 3 giving you 156 and then you would take this number away from 10579 giving you 10423 so your take proft goes at 1.0423. Don’t worry I used a calculater on this and double checked the chart, no maths was done in my head. You also have the option of using a really clever little tool in TradingView called the position tool and for this is will actually do the maths for you by showing you were your stop loss and take profit go. By the way if you are new to trading then I couldn’t recommend TradingView enough for the place to do all of your charting and analysis, I’ve been using it since day one and have never looked back. Best thing is you can use it for free as long as you don’t mind the incessant pop ups, or if you want to trial the Pro version (about £11 a month) you can test it out for a month for free and cancel if you don’t like it using this link: 

https://www.tradingview.com/?offer_id=10&aff_id=25988

So, to conclude, you definitely don’t need to be a maths genius in order to be a forex trader so if that is what’s holding you back you can rule it out as an excuse now! Some basic maths does help so if you are genuinely terrible and struggle with basic sums you may find setting stop losses and profits a little bit tricky at first but even then you’ll probably get used to this side of things with a bit of practice. 

Happy Trading! 

Love from, Your Trading Mentor x

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WHAT IS PRICE ACTION TRADING?

By Your Trading Coach,

Trading Angel 

WHAT IS ACTION TRADING?

Price Action trading is a form of technical analysis which looks at price rather than indicators. If you are brand new to forex trading then I understand that about three things in that first sentence might have confused you so let’s break it down. If you are worried that it sounds too complicated already, then keep reading, because price action trading is a very powerful form of technical analysis and it’s worth understanding 

FUNDAMENTAL ANALYSIS VS TECHNICAL ANALYSIS 

These are two main types of analysis which forex traders do to help them interpret the financial markets and decide whether they want to buy or sell. 

Fundamental analysis looks at what’s going on in the world and technical analysis looks at what’s going on in the charts. Both are important! Fundamental analysis includes financial news releases and economical data such as interest rates decisions, central bank policy, inflation, unemployment rates etc How a country is doing economically is ultimately what moves the financial markets and determines the value of a currency. However, it’s also really important for forex traders to understand how the visual representation of this information on a chart is displayed and how it can be used to get good entries and exits on their trades. 

TECHNICAL ANALYSIS IS THE ART OF READING THE CHART 

Technical analysis includes price action (which we are doing a deep dive into in a bit) and it also includes technical indicators. Indicators are tools which are often based off lagging data which can be used to plot on the chart or to give us readings in order to help inform future trading decisions. These can help us to gauge aspects such as momentum or volatility, which are important for traders to understand if they are going to be trading a certain currency pair. 

Price Action trading is a form of technical analysis which looks at price rather than indicators. That’s my very first sentence at the top of this blog post again but hopefully it makes more sense this time around. 

Candlesticks are the visual representation of price on the financial markets charts. They show us the journey which the price has been on in a certain time period. And there are many ways you can use candlesticks and the patterns they produce in technical analysis. But just before we get into that, let’s quickly make sure we understand candlesticks first.

There are bullish candlesticks which move the market higher and close higher than they open, You would expect to see more of these in uptrends.

There are bearish candlesticks which move the market lower and close lower than they open. You would expect to see more of these in downtrends. 

Candlesticks are made of the body and the wick and like regular household candles which you would use for burning, the body is the thick part and the wick is the thin part. The body shows you the open and the close and the wick shows you the extremes.

PRICE ACTION LOOKS AT PRICE AND TIME

Forex traders look at these candlesticks and the journey they have been on in a certain time period, to help them make decisions about market sentiment, where the price is likely to go next and also for precise entries and exits. This is price action trading. Ultimately price action is any action which is taken from price.

TYPES OF PRICE ACTION 

CANDLESTICK SHAPES 

There are loads of different ways a single candlestick can give traders an idea of what the market sentiment is likely to be in the future. For example large bodies show certainty whereas small bodies and lots of wick on either side (these are called doji candles) can show uncertainty. Similarly a small body with lots of wick in one direction can show price rejection in that direction. For example, a shooting star candle at the top of an uptrend is a strong bearish indicator. A shooting star candle has a small body with a lot of wick at the top, its showing the price at the top has been rejected. 

CANDLESTICK PATTERNS 

There are loads of candlestick patterns which forex traders use to make buying and selling decisions before a trade. A candlestick pattern can be two candlesticks or more. A popular example of a candlestick pattern is an engulfing candle.You can get either bullish engulfing candles or bearish engulfing candles and these are just two candlesticks next to each other which have closed in opposite directions with the most recent one having a larger body than the first one. This is why it’s called engulfing as the second candle engulfs the first one. This candlestick pattern often signifies a move which is more likely in the direction of the second candlestick as the fact that the body is so much larger shows more certainty in that direction. For example if you had a bullish engulfing candle pattern that would mean you had a small bearish candle followed by a larger bullish candle and this would show that the buyers were more in control than the sellers and buyers might think the market is more likely to move upwards after this pattern. Alternatively a bearish engulfing candle would see a small bullish candle followed by a large bearish candle and buyers might interpret this as a possible move to the downside with the impression that the sellers were more in control than the buyers. 

CHART PATTERNS 

Chart patterns are lots of candlesticks over a long period of time which have formed patterns. Traders look at these patterns for signs that a market might move in a certain direction. An example of a chart pattern is the head and shoulders pattern. This has three peaks at the top of an uptrend with the central peak being higher than the two on either side. When traders see the head and shoulders pattern they take this as a bearish signal and often try looking for sell opportunities at the ‘neckline’. If it’s not obvious, it’s called a head and shoulders pattern because it looks like a head and shoulders – apparently!

SUPPORT AND RESISTANCE LEVELS 

Support and resistance levels on a forex chart are lines which forex traders draw on to try and identify the areas of significance. Often these are highs and lows, where the market has reached and reversed previously. When traders identify support and resistance levels on a chart they can then look for signs that the market is either going to breakthrough that areas in which case they would trade in one direction, or if the market shows signs of reversal at the level then they would trade in the opposite direction. Support is the level which is below the candlesticks as it is ‘supporting’ them and resistance is the level which is above the candlesticks. Also they are interchangeable so what was once support can then become resistance and what was once resistance can become support. Think of support and resistance levels as being the floor and the ceiling of a house with many storeys. The floor is support and the ceiling is resistance. Once you climb the stairs to get to the second level, what was once the ceiling is now the floor. Or what was once resistance is now support. 

SUPPLY AND DEMAND ZONES

Supply and demand zones are slightly more sophisticated forms of support and resistance. These are key zones which traders use to identify ares where lots of buying and selling is taking place. On TradingView the rectangle tool can be used to to plot on these areas and then forex traders look for possible trades if the prices enters and exits these zones according to their strategy. Supply is where traders look for sell positions and demand is where traders look for buy positions.  SMC trading (which stands for Smart Money Concepts) is a very popular form of forex trading which was introduced by the trader who calls himself the “mentor to your mentor” (if you’re wondering he wasn’t my mentor but I do find his work interesting), ICT or Inner Circle Trading. I’m actually strongly considering taking his mentorship course so if you are interested in finding out how that goes make sure you subscirbe to this blog as I will obviously be keeping you updated.

TREND LINES 

Trend lines are diagonal lines which traders draw on their forex charts which can help them make decisions as to whether they want to buy or to sell. If the market is moving down, making lower highs each time it makes a move up, then a trend line can be drawn across the highs of the candlesticks and it would be sloping in a downwards direction. A sudden move up with a long bodied candle breaking and closing above the trend line could signify to a forex trader that they want to start looking for buy positions, if the rest of the price action falls in line with their trading strategy. 

CHANNEL LINES 

Channel lines are similar to trend lines in that they are horizontal lines which are plotted on the chart, however there are two of them and the are parallel to each other. The price will be moving between the channel lines. So traders look for sell opportunities at the top of the channel lines and buy opportunities at the bottom of the channel lines and other traders look for candles to break the channel lines before getting into a trade. 

PULL BACKS 

Pullbacks are a normal part of price action. They are small moves in the opposite direction to the trend. When a market is moving in one direction, let’s say it’s in an uptrend for this example, it’s not just going to move with none stop bullish candles all the way to the top. There are going to be small bearish candlesticks all the way up the trend too. These can be the result of traders who are in long positions closing their trades and taking their profits. When a buy position is closed, it automatically opens a sell position which means that if enough traders are doing this at the same point you might see small dips. But other buyers might see this as a good point to enter into a buy position as they get a better price after a pull back. Looking for a pull back in the market followed by an engulfing candle is one of my favourite entries into a trend trade. This works for sell positions as well as buy positions. 

BREAKOUTS 

Breakouts are big explosive moves out of an area on the chart. Sometimes these can be areas of consolation where the market has been in a range and then a long bodied candle pushes the price out of that range. Or these can be breakouts from support or resistance levels or from channel lines. Traders enjoy trading breakouts as often the price moves fast in the direction of the break.

BREAK AND RE-TEST 

But as trading isn’t straightforward you do sometimes get re-tests when a market breaks out which is why some traders don’t trade the break and often wait for the re-test instead. A re-test means that once the price has broken out of the area it was in, it actually retraces on itself and comes back to the area it broke from before moving in the direction of the break. So, for example ,if there was a resistance level which the price broke out of, this would mean a bullish candle closed above the resistance level. Rather than continuing to move higher, the market might then move back down to the previous resistance level which has now become a support level. Once it has tested this level it then moves back up. Some forex traders prefer to wait for the re-test after a break as it can sometimes offer a better price and also means you don’t have to take on so much risk as your stop loss can be closer to your entry point. When you trade the break itself, it’s always sensible to be aware that a re-test might take place, and if this happens you need to make sure that your stop loss is in a safe place below the level so that you don’t get stopped out and lose money on the re-test. 

FAKE-OUTS 

And if trading wasn’t difficult enough, sometimes the breakouts aren’t even real breakouts! Sometimes they are fake-outs! Which means that the price isn’t actually going to move in the direction of the break. In fact, fake outs can be a good sign of market rejection. So instead of the market moving in the direction of the break, if it’s a fake out they might actually start moving in the opposite direction instead. One trick which I think is pretty handy for distinguishing between a breakout and a fake-out is to use a higher time frame. If you are trading on a small time frame then you will see a lot of ‘breakouts’ when you switch to a higher time frame you will notice that the bodies of the candle are not actually closing above or below the levels but are actually just a wicky candle with wick pocking above or below and the body itself remaining in the area. Remember that wick can show us price rejection in price action. So if you see a lot of wick pocking above a level then this can be a good sign that it is actually a fake-out and not a breakout and this can be seen clearer on a higher time frame. When I trade breakouts I prefer to trade on 1H or above. The 4H time frame is actually my preferred time frame to trade on, however with breakouts I think it can be beneficial to go down to the 1H so that you don’t miss too much of the break and end up getting into the trade too late. Just don’t go any lower than the 1H as you might get too many false entries. 

Remember, with breakouts that they do often move fast so it happens frequently that you do miss the move. If you are trying to keep across 28 currency pairs every day it’s very likely you will miss a trade or two. The good news is, once the break has happened you can then move to a smaller time frame to start looking for entries on pull backs just like I mentioned above! There are lots of transferable skills like this in trading!! If I’ve missed a breakout on the 1H chart I will often drop to the 15M time frame and then wait for at least a two candle pull back in the opposite direction to the trend followed by an engulfing candle in the direction of the trend. 

So, now you know a lot about price action in forex trading! 

If you want to learn more and see some examples of what I’ve talked about, then I recently made a YouTube video which is up on Trading Angel’s YouTube channel which goes into price action trading for beginners. You can watch that video here. 

Happy Trading! 

Love From, Your Trading Coach x 

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