- Canadian CPI Accelerates More Than Expected, USDCAD Plunges Fri, 19 Mar 2010 12:29 GMT
- Overnight Interest Rate Update 03.18.10 Thu, 18 Mar 2010 10:37 GMT
- Overnight Interest Rate Update 03.19.10 Fri, 19 Mar 2010 05:01 GMT
post of the day
Article
Previous Articles
Print
- Mar, 19 Anticipating a MACD Crossover
- Mar, 16 Trade with at least a 1:2 Risk Reward Ratio
- Mar, 10 Long Wicks
- Mar, 10 Stop Placement: Negative Risk Reward Ratio
- Mar, 09 Stop Placement: Double Bottom
- Mar, 04 Stochastics: closing above 20 and below 80
- Mar, 02 Selecting an Indicator
- Feb, 25 The Doji as a Neutral Candle
- Feb, 24 Reacting versus Predicting
- Feb, 23 Selling Rallies and Buying Dips
- Feb, 18 RSI Interpretation
- Feb, 16 Double Top Entry
- Feb, 11 Observations on Retracement
- Feb, 10 USDJPY: Multiple Time Frame Analysis
- Feb, 08 Using Fibs in the Direction of the Daily Trend
- Feb, 04 RSI Failure Swings
- Feb, 03 RSI: Overbought/Oversold
- Jan, 28 Identifying Profit Targets on Double Tops and Bottoms
- Jan, 27 Using the Daily Trend to Enter a Trade
- Jan, 26 Guideline for Chart Time Frames
Student's Question:
I chose this chart from my practice account. I think I don't understand this very well. There's a doji marked, and I also have an entry, stop, and limit marked. I thought because the doji happens after an uptrend, it would indicate a change of trend?? However, this would have not been a good trade. My stop is 20 pips below the lowest point of the doji, but the next candle goes lower than that.
Thanks
Instructor's Response:
You make some good observations on this...
Keep in mind that the doji indicates indecision and the potential for a change in direction...there is no sure thing or an absolute in trading.
Since this NZDUSD pair is still in an uptrend on a full view of the Daily chart, the higher probability trades will be in that direction. While identifying candlesticks and their patterns to determine the direction to trade a pair is fine, an even stronger tool in making that decision is the trend on the Daily chart.
In this case the prudent trader would wait for the pair to retrace and then let the pair "bottom out" at a support level. Then the trader could go long and buy the pair back in the direction of the Daily trend.
You may also find this helpful as well...
Personally, I prefer to look at a full view of a chart when making trading decisions...at the very least 75-100 candles. It provides a trader with a much broader perspective as to how the pair has been moving. Then, after that longer range view, the chart can be expanded should the trader choose to do so.
Take a look at the full view of the Daily chart for a comparison...
DailyFX provides forex news on the economic reports and political events that influence the currency market.
Learn currency trading with a free practice account and charts from FXCM.
Resources
