ALWAYS wait for the candle to close

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Zen & The Art of Trading

Table of Contents

Impulse Control

One of the biggest operational hazards for traders, especially new traders, is impulsive decisions. If you are a human trader and not an algo, which I assume you are if you’re reading this, then you can surely relate to this challenge.

The market is a constant stream of information and there are no obstacles to your decisions to act on it.

This can be a great thing, but if you do not have effective personal rules that govern your behavior, then it is very likely that you will suffer from a lack of discipline which will lead to inferior results – or a total inability to make profits at all.

An obvious example of an impulsive decision is seeing a huge green candle and immediately clicking the buy button before you even work out where price is, what your stop loss ought to be and where your profit potential might be. You just buy, because the market is going up, and you need to be in it to win it.

Then, of course, because trading is not so easy as buying something that is obviously going up – price reverses on you and before you know it, your excitement turns to dread as you realize you must bail on the position for a much larger loss than you anticipated taking.

A more subtle example is that you are sitting in a profitable trade, and price gets within a few pips of your take profit limit order and then begins to move against you rapidly.

A huge momentum candle begins to form, eating away at your open profits, and you react by exiting your trade immediately – taking a fraction of the profit you were initially targeting.

Then, price action stabilizes, and after a few candles’ worth of consolidation, continues in its original direction and blows right through your initial profit target. You placed a good trade, you were correct in your analysis, you made money – and yet you screwed it up, and probably feel terrible.

This is one of the incredibly frustrating (and counter-intuitive) aspects of trading psychology – sometimes even winning can make you feel bad.

Human Instincts

I personally can recall many embarrassing instances where I got sucked into buying the top of a huge bullish candle out of fear of missing out, often with an extra-large position, only to watch in horror as price immediately retraced and closed as a reversal candle.

Or perhaps the most frustrating scenario of all – I would be in a perfectly valid trade that meets my rules, with my stop loss in place and my position size responsible and appropriate for the setup.

But then I’d make the mistake of watching price action obsessively, sometimes on a much lower timeframe, and I’d notice a big momentum candle forming in the direction of my stop loss.

I’d convince myself that the trade was going to lose and I’d be better off taking a small loss early than the full loss later.

And then, of course, price would come within a few pips of my stop loss and then immediately reverse and rocket on to hit my profit targets, leaving me behind – not only without profits, despite being correct in my analysis – but with a loss.

These are common situations that new traders find themselves in, and some of the main reasons why so many traders fail to find success in the markets.

Trading has the effect of triggering the human brain’s subconscious reaction mechanisms in a way which can cause us to sabotage our own trading results.

I am talking about the fear of missing out, greed, anxiety when confronted with ambiguous market information, and emotional distress as a result of loss (or even gains, which can trigger a fear of losing what you’ve made).

These are all very natural human instincts that have served us well in the past. It is wise to remember that we are not so far removed from our evolutionary ancestors.

We have not outgrown our natural wiring as hunter-gatherers and self-conscious mortal beings. The fact that we all have a chronic fear of loss and pain is not surprising.

Thousands and even just a few hundred years ago, these instincts were extremely important to our day-to-day survival. But as traders, sitting at our desks, looking at computer screens – these impulses have the capacity to ruin us.

The subject of subconscious human psychology in relation to trading is a dense one, and a topic for another time. But it is important to understand these ancient cognitive habits so that we can understand what drives us to make impulsive decisions in the first place.

Impulse control is not the same as patience. Sometimes impulsive actions are not necessarily the result of poor self-discipline, but poor self-awareness.

Most of the mental habits you will need to develop in order to become successful at trading will not come naturally. They will need to be learned, grown and built over time.

There is no shortcut, and nothing I write can enlighten you to spontaneously develop them. I have been studying human psychology and self-awareness for over a decade, and I myself still struggle with certain aspects on a regular basis.

But there is one extremely powerful thing I can suggest that will significantly improve your ability to control yourself when confronted with a temptation to make an impulsive trading decision.

Wait for the candle to close.

“It’s not the notes you play, it’s the notes you don’t play.” – Miles Davis

— Zen & The Art of Trading (@TradeWisdom) February 15, 2020

Wait For the Close

It sounds simple, and to many of you it may even be disappointingly obvious. But this is an important concept for new traders to grasp, and experienced traders to remember.

Just as in life, the markets are almost entirely unpredictable, albeit deceivingly orderly. Usually, it behaves in a way that makes sense even if it often seems random. But the truth is, as any experienced trader will know – anything can happen at any time.

As traders, uncertainty is a monster we must battle constantly. That is our job. To confront uncertainty with skill and confidence and come out the other side winners. If you have read my other articles about Edge and Technical Analysis, then you know my thoughts about this.

So what is one simple habit we can develop as traders to avoid making bad reactionary decisions in the heat of the moment, when anything can happen at any time?

Be calm, patient, professional and wait for the candle to close.

Before you enter a trade, you should have determined a timeframe on which to monitor it. It is rarely wise to consult more than one or two timeframes for trading decisions, so for most traders, deciding which timeframe to base your decision on should be easy.

Once you pick a timeframe to focus on, then stick to it. Don’t place a trade on the 15-Minute chart and then monitor it on the 5-Minute, or even worse, 1-Minute chart. Likewise, don’t place a trade on the 4-Hour chart and then monitor it on the 15-Minute chart.

Of course, there are exceptions to this guideline, but they should be thought of well before a trade is placed and included in your trading plan. Some traders like to place a trade on the 4-Hour chart and then trail their stop loss on the 1-Hour chart. This is perfectly reasonable to do and can be quite effective.

But the rule still applies. If you are a systematic rules-based trader who uses systematic stop losses, then you must always wait for the candle to close before acting on any trading decision you make.

There is a very good reason for this, as I outlined at the beginning – a giant wick was a candle body before the candle closed. Never forget that.

Case Study

It’s easy to identify a rejection candle pattern after the fact, but what is it that makes it a rejection candle in the first place?

Price gets rejected because people who act on those big candle bodies before they close get trapped when the candle closes against them, and are then forced to exit their position for a loss – if they have any sense. But many traders won’t. They wait until things get much worse.

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After a clear price rejection, the larger professional traders who had the patience to wait for the candle to close (and have more influence on market direction) are now safe to enter en masse in the direction of the rejection, further fueling price against those traders who are trapped.

Here is an example that I witnessed recently:

Even I thought this move looked impressive at the time given there was no obvious catalyst. But sure enough, five minutes later, the candle closed like this:

And then price rolled over, and it never looked back:

Those traders who bought the top were soon forced to panic-sell their Long positions right into the hands of more disciplined traders who were waiting patiently to buy back in at a much better price.

This panic-selling caused new traders to pile in on the short side, trapping them next, and causing a rally. Price did not rally significantly from there, as price was in a down-trend. But you can see the recurring pattern:

Conclusion

I happened to be involved in a trade during this bull trap, but I was Long. My take profit limit order (which was an order to sell) was filled at the very high of the wick.

I even got filled at a slightly better price than my actual limit order due to slippage.

This means that I sold my position right into the excited hands of exuberant buyers, rookie traders (like myself a few years ago), who bought the very top of that candle at market without waiting for it to close.

Pure luck, of course. I had no idea this would happen. But I didn’t need to.

They lost, and I won, because I had a plan and I had the patience to see it through. I had the discipline to let my trade play out without emotional interference. I put in the work.

The moral of the story is: always wait for the candle to close before you make a trading decision.

ALWAYS wait for the candle to close

Hello everyone, hope everyone has learned a thing or two by reading my blog. I’m about to make a transition to discuss one high probability trade a day instead of constantly covering many trades in one post. I believe if I focus on one high probability trade and discuss why I placed that trade I can better explain myself. I will occasionally post about several trades but for the most part I will focus on single high probability trades. I’m still not profitable, but I am about break-even ratio. I’ve been trading for almost a year, and I’ve learned a lot along the way, but I have much more experience and screen time to go, and I wont give up. I think that you need to be persistent if you want to learn how to trade profitably. After all if it was easy, everyone would do it and no one would be rich, because you have to have two people to complete a trade. One will be right and win money and the other will be wrong and lose money. The ultimate piece of knowledge to learn in trading is how to piggyback the large institutional moves, because they are the ones that “move” the market, so it pays off to learn how to follow them.

On the 22 nd I placed one trade on the AUD/USD pair. Looking at the chart we see price made a sharp bearish move and had a correction shortly after, so I waited to see what price would do, and there are three outcomes that could happen. Price could resume the previous bear trend, price could reverse in the opposite direction, or price could range for a while. Price entered into a range (like it does a lot after a strong move in either direction according to Al Brooks), Well as I was waiting for price to make a move, it returned back down to try and retest the low, and on its way it met with a lot of support (rejection of lower levels) and I waited for that bar to close. As the next bar formed it tried to move down again and saw the same rejection that the previous candle ran into. This meant the bulls temporarily saw this level as a good place to enter their longs, and to make things even more probable, there was a bullish pinbar that formed, price was away from the 20 EMA, and the Value Chart was in the 92/94 range which signaled possible oversold situation. The Pinbar was my signal candle, I entered a call here and it was ITM. Remember, ALWAYS wait for the candle to close if you are contemplating a trade because the candle can change direction in a heartbeat, you need to see what the final close of the candle is to get an idea of what price is likely to do.

The 3 Worst Times to Trade Forex (And When to Trade Instead)

Everyone wants to know where to buy or sell a particular market.

Is the 1.1800 area primed for a short or should you wait for 1.1900?

But the truth is, trading is as much about knowing when not to trade as it is knowing where to enter a position.

That may sound like the same thing at first, but I assure you it isn’t.

For instance, the EURUSD may have formed the perfect bearish pin bar at resistance, but if it occurs right before an ECB rate decision, it isn’t the right time to trade.

The location of the signal was spot on, but the timing was off.

Before I scare you off with yet another factor you need to consider, let me tell you that it isn’t all that difficult. In this post I’m going to share three times when sitting on the sideline may be the wise choice, as well as which are my favorite days to trade.

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I’ll also share a few questions to ask yourself to make sure your mental game is on point.

Read on to learn the best and worst times to trade Forex.

1. Immediately Before or After High-Impact News

As traders, volatility is what makes us money. You can’t profit from a market that never moves.

We’ve all been in one of those positions that takes off almost immediately in our favor and doesn’t want to stop. And after two days of traveling 300 pips, we’re left with a boatload of cash.

Those are good weeks. But they can also be incredibly dangerous, especially for the novice trader.

You witness how an increase in volatility can produce profits out of thin air.

On the surface it all seems quite innocent. After all, what’s wrong with observing that higher volatility equals greater profits?

Ah, now you see where I’m going with this. You know that news, particularly high-impact events like rate decisions and non-farm payroll, trigger volatile conditions.

If you have attempted trading events like these, you know how dangerous it can be. Yes, volatility can make us money, but attempting to trade an event that has a random outcome and market response isn’t the way to go about it.

It also goes against what we do as price action traders. Our trading edge comes from signals the market generates on the higher time frames, namely the daily charts.

There’s no edge in trading the news. That goes for entering a position immediately before or after an event.

Even if the market behaves and moves in your favor, you’ll likely be stopped out before you can realize any profit.

So what’s the solution?

Wait for the session to close at 5 pm EST before making any further considerations.

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That’s it! I call this the settlement period, and it occurs each and every trading day between 4 pm and 5 pm EST.

And if you are trading the 4-hour chart, wait for the next 4-hour candle to close before even thinking of committing any capital.

The simple act of waiting for the next daily or 4-hour candle to close has kept me out of more dangerous situations than I can count.

Notice that I said simple and not easy.

There’s nothing complicated about waiting for a candle to close. Anyone can understand the concept.

The difficult part is having the patience and discipline to actually wait.

Know that just because the market is moving, it doesn’t mean you have to trade it. The little-known truth is that 99% of the volatility you see every single day is just a trap waiting for the unsuspecting trader.

Quality setups don’t come around often, but when they do, you have to be ready. If you’re chasing volatility every day, you won’t be ready.

2. The First and Last Day of the Week

The first 24 hours of each new trading week is usually relatively slow. Market participants are just getting back online after their 48-hour hiatus.

It’s also when the markets are figuring out which direction they should head for the coming week.

With this in mind, I tend to stay on the sideline each Monday—unless I already have an established position from previous weeks, of course.

On the other end of the spectrum, we have Fridays.

The final 24 hours of the trading week is often marked by lower liquidity. As you may well know, technical analysis works better in highly liquid markets. That’s one reason I switched from equities to Forex back in 2007.

Moreover, I don’t like taking on new risk before the weekend. The Forex market can sometimes gap quite aggressively at the week’s open, and I don’t want to get caught on the wrong side of a Monday gap.

Between these two days, Friday is the worst offender in my opinion. The idea of opening a new position in front of a 48-hour window where I’m helpless to do anything but watch doesn’t sit well with me.

So there you have it, Mondays and Fridays are the two worst days to trade, with the latter being even worse than the former.

By the process of elimination, you can see that I like to open new positions between Tuesday and Thursday. I’ve found that the best setups occur during these three days.

By this time, market participants have settled in for the week. It’s also far enough from the weekend to cut your losses if the market moves against you.

To wrap up, here’s how I approach this…

Any quality setup that occurs between Tuesday and Thursday is fair game.

I will sometimes trade on Monday, but the setup has to be top notch. It needs to be so good that I would have to be crazy to pass it up.

Fridays are off limits in my book. You’re better off waiting until Monday to reassess the situation. That way you don’t need to worry about the market gapping against your position at the start of the new week.

3. When You Aren’t in the Right Mental State

Trading is a game of mental discipline. Those who can keep their emotions under control come out ahead.

We know what happens to those who can’t.

But no matter how disciplined and controlled you become, there will always be ‘those days’. I’m sure you know the ones I’m referring to here.

Maybe you aren’t feeling well or didn’t get a good night’s sleep. It could also be that you’re busy with other tasks which means your thoughts are elsewhere for the day.

Another dangerous scenario would be a losing streak. If you have lost the last three or four trades, chances are your emotions are on high alert.

Whatever the case, if you aren’t feeling up to the task of trading, then don’t!

There’s no rule that says you must trade today. Even if there is an A+ setup sitting right in front of you, some time away from your charts may not be a bad idea. In fact, it usually helps immensely if you aren’t feeling up to the task.

And if you’ve experienced a losing streak, one of the best things you can do is to take a break. Once you come back, try risking half of your normal position size until your confidence returns.

Final Words

Knowing when to trade, and when not to, is critical as a trader. It will help keep your capital safe when conditions are volatile or markets are illiquid and capitalize when the time is right.

One of the worst times for placing trades is immediately before or after high-impact news. These events range from central bank rate decisions to non-farm payroll.

By waiting for the session to close at 5 pm EST, you avoid the ‘chop’ that often occurs around these events. I would estimate that 90% of the setups I take occur on the daily time frame. The rest happen on the 4-hour chart.

Another time to avoid is the first and last day of the week, with Friday being the worst offender of the two. Taking on risk ahead of the weekend can be a risky endeavor. As for Monday, markets can be indecisive as traders recover from the weekend lull.

Trading is a mental game. I would argue that it’s 80% mindset and 20% mechanical. So if you aren’t feeling at the top of your game, take a seat on the sideline. It’s better to miss a setup or two than to risk a costly emotional meltdown.

I have found that Tuesday through Thursday are the best days to trade. Just remember to not enter a position immediately before or after high-impact news. And last but not least, make sure your mental game is on point before risking any capital.

Your Turn

When do you think is the worst time to trade the Forex market?

Leave your comment or question below and I will respond shortly.

Leave a Comment:

72 comments

Awesome post Justin! You just addressed the elephant in the ‘Trading room’!! ��

For me it’s not an opinion but a complement. Thank you for yet another good lesson. But I have to agree with you, I have seen the market being tired on Monday and Friday. I blew my account on high-impact news on few ocassion before, so I don’t want anything to do with it.

Nice note, Thanks…..

This will be very helpful to beginners like me. Thanks a lot.��

Dear sir,thank you so much for your educational materials,I find to be very helpful and very encouraging to me,as am trying to gain an edge to be consistently profitable as a daily forex trader.
I will like you to send me more educational materials,as your articles sit well with me and this are the things am still learning as a daily trader.

What is best way to trade a high impact news since it gives high profit in return if trade well

From my own experience, use extreme low volumes instead of staying aside, but that’s if you have good sentimental analysis of that pair, I make quite some cash with high impact news, I’ve been caught on the wrong side too but that’s fewer than the right side,

The best thing to do little before high impact news is to place sell and buy orders at the same time with risking %2 of your capital. No matter what direction the market goes you only lose %2 and your profit is bigger then what you have risked on the trade.

Excellent post Justin! I don’t usually trade on Mondays or Fridays either..The best day it seems for me is on Tuesday and Wednesday ��

Thanks for the heads up. Mondays are slow indeed. But as for me, I have observed that markets move on Wednesday, Thursday and Friday. I rarely hold trades over the weekend. I use daily chart for setups but 4hr chart for entry and exit.

I agree with your sentiments 100%

t hHi
trading the news is the worst set up
risk management is the best set up
thanks for your input
regards

Completely agree with everything. Worst day for me is Friday, as you said, the wait and potential for gaps on open Monday is too stressful. That said, do you employ any different kind of approach with trades carrying over to the next week?

I totally agree with your comments, Justin. Valuable confirmation! How much before the end of session would you resist trading? Cheers, Keith

Thanks Justin for this lesson it’s powerful��

Right on point Sir

Really thank you thank you again .

Thanks a lot sir.

A gem! Thank you Justin

Thank you for all the free information you provide on your website. If you trade mainly on the daily time frame and enter a trade on a Thursday, do you close it out on a Friday so as to avoid holding it over the weekend?

If I have made significant gains, I will close at Fridays end and possibly reenter on Monday/ Tuesday.

Awesome post. I had given up on forex before now but applying your methods have made me believe I can still make it here. Thanks for sharing your knowledge.

Hi Justin,
You are there again as usual with your wonderful and insightful articles. This is so helpful to me, now that i am still battling with my emotions. I think i need to be more disciplined and work on my emotions. thanks a million. Please more articles on how to handle emotions in trading the forex market will be highly appreciated.

Thanks for the heads up.I also think that the first two weeks of the month is the worst time to trade coz it contains news that move the market.

Great sharing Mr. Ben, I completely concour. You are just wonderful.

What if you are allready in the trade? Do you cancel the SL waiting for violent turbulance or what?

Nice lesson justin. I had a question here, my grandpa said that trading in the end of the year is not a good idea. Its that right?

If one or both of a pair have a public holiday (eg a bank holiday) on what would otherwise be a trading day.

Thanks Justin, I’ll keep that in mind

This is a great write up. Thanks great man

you are on point as always dear Justin. I concur that Fridays are the worst days to trade, but also to me another experience of when not to trade is placing a trade right after a major win. I have noticed that the joy and excitement this brings often leads to a lot of miscalculations or uneven analysis. So, to me after series of major wins, step aside till the emotions are settled. Thanks.

Dear Justin, thank you very much for this material, that is very interesting and helpful, because it is the way how to think about trading. I hope that I will be able to follow all your instruction and get on the right successful way in my trading. Thank you. Milan

That’s great cobber very logical 3 rules set in concrete in my brain

hi, Thank you for your guide. I had some questions. Please answer.
1.If we arrived the market on Tuesday and did not reach the target by Friday, we should leave the market on Friday?
2-If Friday we arrived at the trigger we would go to the market or not؟

Thank you Justin – as always great advice.

Thanks Ben. I am 100% on your side

This is nice. Better protect your capital than loose it in a jify. I go with you. Thanks

Why don’t you said when is the best time for trade

Wow thanks so much for the info.I’m new in this but quite interested in forex.

First of all, i thank you so much for the experience of yours that you have voluntarily shared, more power to your elbow. sir, I’m a Forex trader and i have traded for like a year now with the real money, not demo this time, even though i had practiced with the demo before trading with the real money, like i was instructed by my instructor when i began. Sir, there is where i find much more interesting in your analysis . . ., where you talked about when and when not to take position.Correct me if i misquote you, you said it isn’t advisable to take any position if the first initial candle is not broken. I’m bothered as to how close the stop-loss would be from where position could have been earlier initiated, considering the manner at which the market price movement works (zigzag). Don’t you think that by the time you enter the trade after the first candle is broken, the market price movement would have been close to your take-profit level if you had entered earlier?

Thank you for this insight. I have to fully agree, as i lost my capital on those 3 areas. Well, it is an expensive education for me, the hard way

Thank you very much for dendisg me an education materials.Its a big help for a new trader like me . I’m hoping you will share more materials on us. Thank you.

Awesome. You hit the nil right on the head. Trading the news is the cancer that has been slowly killing me. Congs!

Hello you mean I should always wait after close of New York 5pm before taking any trades.

This is excellent Mr Justin.
Please keep up with the good work. It’s highly appreciated

Thanks for this article.

A question sir… for trading from Tuesday to Thursday… based on the Daily timeframe, what would the potential average pip range that can be achieved? 100 – 200pips? Thanks

Thanks for this post

Tqvm, very nice concept and strategy

Now another thing for 2020 i am going to see what high impact events are coming up before i place a trade. this article really helps, thanks Justin.

Is this will effect when u r trading daily time frame……

I am very grateful for these valuable yet free lessons..

Thanks a lot.So what about the early taken stop order or limit order? Should we close them before a highly impacted comming new?

thanks for sharing

You are 100% correct! Fridays are a “no”, “no” for me and I completely avoid ‘big’ news.

Sunday and Friday, and again to not enter a position immediately before or after high-impact news

I’m sorry I mean to say Monday and Friday,and again to not enter a position immediately before or after high-impact news

This is so helpful boss.I celebrate you sir

So true Justin I just blown my Acc on Monday so now I know to analyzed from 4pm and 5pm.

Thanks for commenting.

dear – Many thanks for your professional and honest advice. is certainly appreciated.

I’m proudly of u’re knowledge,thank u

After losing a trade which should have gone in your favor….. don’t try to fight the market back

Right, avoid revenge trades at all cost.

I also agree with you. Wednesdays,Thursdays and Friday turn to be the best from what i have observed.

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