Got a Hunch for a Trade? Verify it Before Trading

Getting emotional when trading happens to everybody. That’s life. When you take a look at the charts, suddenly something you have learned or something you read about a currency comes to mind, and you feel that you have a great trade at hand.

Are you supposed to control your emotions and dismiss what you’ve seen. Absolutely not. First of all, it’s hard to control your emotions. You are are human.

Second, you might be absolutely right and in for a winning one. That’s great! While emotion control is hard, you can still control your trading fingers and examine the trade before making the move.

• Examine your system. Does the potential trade correlate with it? Or is it totally disconnected? If there’s no correlation, your hunch may be wrong.
• Stop loss and Take Profit: When you get a good feeling about a trade, you might be overconfident that the pair will go in your direction and will never stop. Stop! Don’t enter a trade without checking out where to put this orders and don’t forget to place them. And don’t move them afterwards.
• Verify on a clean chart: OK, you saw the potential on the same chart you are looking at day after day. Perhaps you began imagining things? Perhaps you have some additional lines that make things messy and confusing. Just to make sure, open a new, clean chart, and redraw the lines you used to plan the trade.

Now go for the trade. If you are successful with a hunch, that’s good. You have developed an ability to grasp a potential trade with relatively naked eyes. You are becoming a more seasoned trader.

But don’t get carried away.

The next time you have such a hunch, and you feel that you are “in the zone”, do try to control your fingers from hitting the BUY or SELL button and do verify what you are doing.

What do you do when you have such a hunch? Do you go with the flow, depress it, or check it out thoroughly?

Further reading:  5 Most Predictable Currency Pairs – Q1 2012