When I relate this experience to trading it seem that by jumping in and day trading and not looking
at the larger time frames you are not seeing the big picture. By larger time frames I mean the daily,
weekly, and yes, the monthly charts. The larger time frames will pull the smaller time frames in the
direction of the larger trend. By looking at the big picture you can adjust your trading accordingly.

Swimming upstream is the reason you need to be aware of your long-term surroundings. It is really
hard or doesn’t work. You may see a trade develop on a small time frame and it goes against you
before you have a chance to get out without a loss. If you manage it correctly you will only suffer
minimal damages.

Have you ever been swimming in the ocean and all of a sudden you seem to be swimming nowhere?

I was playing in the ocean and was looking toward shore when I noticed the waste deep water was
now only knee deep and flowing out to sea I turn around just in time to see a 15 foot wave right
behind me. Before I could do anything I was picked up and dropped on my head where my feet once
were.

And that’s what it can be for YOU if you don’t honor your trading rules and not swim upstream.
Just because the small current is going out to sea doesn’t mean that, that is the way the larger
current is going.

The monthly chart, for the trader, is the most dominant current influence. It’s hard to turn a
battleship or an ocean liner…They turn slowly and after they do, they stay on that direction for
a good while, until some grand force has them turning again.

Take a look at any monthly chart. Big move up, then big move down, then up.. on and on.

The weekly chart has a lesser “macro” influence, of course, then the monthly, but a more immediate
influence for the day-trader. The daily chart has less of the macro influence, and more immediate
for the day-trader than the weekly, and so on for the 60-minute on down the timeframes.

If you’re a day-trader… sure, you’re going tick by tick in many cases… but when something happens
that “doesn’t make sense”… think about which way the current is flowing.

To make sure the current is my friend, I’ve learned to take the majority of my trades WITH the
current… and it’s made a very positive difference in my trading results. It will likely have
the same effect for you.

If I’ve noticed that the monthly, weekly, and daily chart currents are all pulling the same
direction, the wise thing to do in to not trade against all those forces.

The smart trader looks for the path of least resistance.

Hope this helps.

Just remember you get paid to wait.  Let the trade come to you.  Try this exercise: take a look at the indicators
on a 15 minute time frame.  See where the market does a break out.  Then look at a larger time frame, say the 1
hour.  You will see that when the larger time frame makes a good break and you entered on the larger time frame
you would have bypassed the noise that a smaller time frame creates before it gives the signal for the big move.
 

The Norwood Alerts will be out soon then you can have the alerts look at 30 to 40 time frames at once.  You will
soon have more trades than you can handle.  You will find yourself having to choose which trade you will take. 
Trade smart not hard.

Lets look at some basics.  Identifying a trend is purely technical.  If you have analyzed charts, you know that prices move in waves.  By watching the way the waves move, you can see the direction of the trend. 

(figure B) See on this 4-hour chart that the market moves then rest then moves more.  Each of the rests and moves have different sizes and strengths.
Now look at the same move as above but it is on a 30-minute time frame.  There are 5 different entry signals you can see them by the way the prices flow in waves.

 

The picture shows this currency is moving lower.  This is evident by looking at the highs and lows, or peaks and troughs, made by the currency price.  An uptrend has successively higher highs and higher lows, while a downtrend has successively lower highs and lower lows.

The angle of the trend is import to notice.  Not all currencies move in the same angle, distance, or speed.  Some move fast and others move slowly.  When selecting a currency pair to trade notice that a currency that moves up fast will move down fast as well.  Also trends with steeper angles are the hardest to sustain over time.

The key to large gains is to identify the trend as early as possible.  Identifying a trend is a visual process most are discovered in hindsight.  However, if you keep close tabs on the market, watch the indicators and alerts then these moves should be easy to identify.

Entry points are the easiest part of trading a trend.  As long as you are focused on risk management and have predetermined position size, the entry point should not be the main focus of your system. Yet a good entry may produce some good gains more quickly and make it easier to manage your position out of the gate.

Where to exit a trade is one of the most important parts of profitable trading.  When you close a trade, your efforts are finalized with a gain or a loss.  This brings us to a good entry can lead to easier exits, but a predetermined exit strategy is a critical part of a successful trading effort.

Exit points should be determined using the same indicators that were used when the trade was entered.  Establish the exit upfront and be disciplined in your follow-through.

Risk management and the size of the trade are the most critical elements of a successful trend-trading system.  After conducting your analysis, decide how much you want to risk on a trade.  Remember, the most critical ingredients of a successful trading plan are managing risk and cutting losses quickly.

Once the trend has proven itself then you might want to consider adding on to the trade.  One of the easiest ways to do this is to go to a smaller time frame and take all the signals that are going in the direction of the trend.  See the examples above.  You may watch for a pull back on the smaller time frame, then enter when the indicators give you a signal in the direction of the trend.  You should use the same indicators you used to enter the trade in the first place, so as to keep the advantage in your favor and your trading positions at a low-risk level. 

In summary, trend trading is a systematic approach to the market that aims to take advantage of only those currency pairs that are moving in a trending direction.  Good fundamental information can help tell you what to trade but through technical analysis you can determine when to enter a trade.
 

When you get the larger picture, you can easily see that going long had a low probability of succeeding because the market was in a downtrend.  By taking a long trade on the 5 minute you were taking a trade that has a low probability of being successful.  If it does turn out to be profitable it was for a small profit. 

Look at the charts below and see what the trade looks like on a 5 minute then on a 1-hour and a 4-hour chart.  This is why we always say trade in the direction of the trend of a larger time frame.  There are some good trades on this 5-minute chart if you are trading in the direction of the trend.

We have pointed out some reverse or counter trend trades they are not as good as the trades in the direction of the trend.
 

When the market has been trending for a while and a trader has been going with the trend then the market stops for a while and looks like it will make a quick retracement.  The trader jumps in for a few quick pips and get right back out again only to find that the market did not give the quick pips and continued on with the trend.  Not having set a stop loss he is now looking for the next bounce to minimize the loss to only end up losing even more.    The risk reward ratio is not good either.  With a Large stop loss if there is a stop loss at all and only a small profit target.    At times like these it is better to stick with the trend.  More money will be made, less stress will be involved and the trader’s focus and connection with the market can more easily be maintains. 

A trader that is going to practice countertrend trading will have to be quick and willing to take many small losses.  In the long run it is better to wait out the countertrend rather than trying to make some extra pips on it.

You can see where the vertical line is located on each chart.  At this point there is not an entry signal on either the 4-hour chart of the 30-minute chart.  If you are patient and wait for the proper set up you will get a good signal to enter a trade.
 

Consumer Price Index for the USA
USA Non-Farm Payrolls
USA New Home sales
USA Existing Home Sales
International Trade Balance USA
Trade Balance for Canada
Retail Sales for USA
Retail Sales for Canada
Gross Domestic Product USA
Gross Domestic Product Canada

If you go to www.forexfactory.com you will find the news announcements for the week.  When you see one of the above listed be aware that the market will probably make a good move

Note: We don’t trade the news and I highly suggest that you don’t either. But if you do, the above are the only announcements that you should trade around.