How to prepare for a new week

The weekend is the perfect time to study charts, calendars and news to paint the “mind map” of the new week.

Traders who consider themselves short term, trading either the M15 or up to H1 charts often believe that they don’t need to stand back from the market and take in the bigger picture. This can be a mistake.

No matter the timeframe we use, the data is the same, it is just how traders view it that is different.

Everything that a M5 traders sees a H4 trader does too. What drives the market is the same for all.

There is a great deal of “white noise” or chatter when you concentrate on the M1 and M5 charts. A lot of irrelevancy.  

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This is a weekly chart with two bullish candles. No look at the daily charts that made up those weeks.

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It is obvious for the chart that if the week is bullish overall, the dailies will be overall bullish too. Added to this any bearish day will be naturally shorter.

Of course the shorter term charts can produce profitable trades that are counter the main trend. This is a bit like roulette, a player can win despite a low or negative expectation of success.

A longer term trader will have a higher expectation of a win since he will trade less and his research will be more involved. He will only “pull the trigger” when his signal is confirmed.

Every trader wants longevity and to be winning in five years but it is the path chosen to get here that is different. The < H1 traders path is very up and down whereas the >H4 traders should have a more gentle gradient.

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This chart shows why it is necessary to check weekly candles over the weekend as they give a good signal when compared to the dailys. Taking a look at the weekly gives an idea of the dominant trend.

We can also check how the weeklies are shaping up and what should happen in the next one.

On the higher time frames we can identify key middle term levels, these high probability levels will influence the price even on smaller time frames. For example let’s take a look at USDJPY which at first glance is in strong bullish trend, significantly above previous ‘higher high’.

This is why we should expect with high probability another bullish candle. Scenario B assumes pin bar in form of shooting star pattern if the current bullish wave weakens. Remember that we are clearly above previous high.

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So, now we have some ideas forming. Let’s see how it looks on the daily chart. As we know price is currently below important level of 115.00 that is confirmed by clear  upper wick ending last week. That is a sell signal which can be continued in the beginning of new week creating the lower wick of new candle.

So the new week can start from small bearish correction of the last rise. We can set the support using candles, Fibonacci retracements or any other tools. These are potential places where we can look for signals consistent with larger trend which assumes that most of the ticks in the next week will be bullish.

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As a rule, if we are wrong, the week will be clearly bearish interspersed with bullish moves during the week.The strong support/resistance levels consistent with trend should encourage investors for the price to move sufficiently in order that we can secure a TP order or clearly reduce risk by moving stop loss.

We never know when the trend is going to reverse unless it’s over and in that case we still have some time to quit with small loss because there will be still many traders wanting to join this trend. These people are the ones who will buy our position.

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These are of course just examples of forecasts and using them.

Looking back to justify an idea is a dangerous ploy but equally it pays to understand price action and how we can justify and verify using different timeframes.

A lot of will depend on our personal experience. Our impression of probability of different scenarios will depend on our trading style. Perhaps we prefer small, few pips moves or bigger swings. Trading is a totally personal experience.. Despite that we should review of different time frames during weekend and choose a few setups which especially fit our style. There is a small possibility that it could harm quality of our transactions in the next week but most likely it will improve our decisions to be more profitable.

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Finally an example of a scenario which played out badly.

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The scenario assumed a continuation of bullish trend especially because fundamental data was favourable. Eventually day ended completely different than I expected, Thanks to my decision to choose my place entry point  wisely I did not lose much. Now I do not have that much to earn back in the future.

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