The Forex Trader Safetrading Checklist

The Forex market can lure the novice Forex trader into trading scenarios that appear very attractive at first glance but turn very quickly into a losing trade. Many a Forex trader will relate to this experience:

Price has been in a consolidation channel for one or two hours.

In an attempt to get taken into a trade at the top of a channel you place an entry order at a strategic place.

Just minutes later after your trade has been filled, you see a loss of 10 pips, then a minute later, 15 pips, and a short time after that, wham, your stop is hit and you are out with a loss.

It’s ironic isn’t it? Price was static almost for hours. Yet the minute your trade is entered price moves right against your position and you get stopped out. All you can do is scratch your head and exclaim: “What happened?”

A new Forex trader can avoid a lot of heartache by developing a Safetrading Checklist. This will help with gaining experience so that good trading methods become habitual.

Just having a procedure in place that has to be executed before pulling the trigger on a trade can prevent the Forex trader from quickly entering a trade just because there are some sudden movements on the screen and the trader is worried about missing an opportunity.

Yes, disciplining oneself to take time and go through a checklist first may mean missing some good opportunities occasionally. On the other hand, it will prevent having losing trades frequently.

The Safetrading Checklist that follows can help make a new Forex trader cautious, so only high probability trades are considered which in turn leads to a preservation of trading capital.

Safetrading Checklist

Avoid Going Long If:

MACD on either the 4 hour, 1 hour or 15 minute time frames are showing negative divergence.

MACD on the 4 hour or 1 hour chart is pointing down.

Price is well above the Central Pivot Point for the day.

Price is below the 200 EMA (Exponential Moving Average) on the 4 hour and 1 hour chart but above the 200 EMA on the 15 minute chart. (With this setup on the 3 times frames price is bucking the overall trend and can turn against you at any time.)

Price is above a Fibonacci 50, 62, or 79 retracement (calculated from the last high and low)

Your stop is not below multiple layers of support such as a significant previous high or low, pivot point, or Fibonacci level.

Avoid Going Short If:

There is positive divergence on MACD on the 4 hour, 1 hour, or 15 minute chart.

The 4 hour and 1 hour charts show MACD pointing up.

Price is well below the Central Pivot Point for the day.

Price is above the 200 EMA on the 4 hour and 1 hour chart but below the 200 EMA on the 15 minute chart.

Price is below a Fibonacci 50, 62, or 79 retracement (calculated from the last high and low)

Your stop is not above multiple layers of resistance such as a significant previous high or low, pivot point, or Fibonacci level.

The Most Important Lesson

Implementing this Safetrading Checklist strategy may reduce the number of trades the Forex trader participates in. However, here an important lesson is learned – patience! Waiting for a high probability setup can make many demands on a Forex trader’s mental resources and emotional strength.

This is probably the most important lesson the new Forex trader will have to learn. Using a Safetrading Checklist like the one above can make the Forex trader slow down, engage in thorough analysis using the technical indicators available, and really start to make progress as a Forex trader.

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