How to Establish a Directional Bias

Forex trading involves substantial risk of loss and is not suitable for all investors. Ibrahim Busu December 6, at 6: Waiting can be a little frustrating for beginners, The login page will open in a new window. Swing Highs and Lows.

Action Bias can be used to determine the primary direction to trade the currency pair. That is, one could only consider going long when Action Bias is on the upside and short only when Action Bias is on the downside. Action Bias can also be used to determine the exit of your trades.

Are you losing the ‘forest’ in the ‘trees’?

Establishing a directional bias is simply a matter of understanding higher level charts, support and resistance , price action and the overall tendency that the market will continue to move in one direction or another, until something equal or greater may cause a break and shift the tide on the higher level charts. The directional bias plays a huge role in the counter trend versus trend following strategy.

Strategically speaking a high probability setup is one that has been thoroughly prepared in advance and the process of developing a bias is part of that preparation. Establishing a directional bias is a two part process:. This is a good habit to have and it will definitely improve your rate of success. In fact, we can say trading is probably more about the thinking process than it is all of the other things. We think, we analyze and we arrive at a judgment or a conclusion.

After we arrive at that directional bias, we try to execute our judgment and do that at a good price so we can make a profit. The easiest way to establish a directional bias is through price action. It is really important to simply sit down on Sunday at some point and take 30 minutes or so to figure out in your mind what you think the market has the greatest potential to do during the upcoming week. As you do this you should make some notes; record in your Forex trading journal what you see on the charts and use that information to explain your bias.

What condition has the market been in most recently? Is it trending, if so, which direction is the trend? The next thing you want to do is draw in the relevant support and resistance levels on the daily chart. You will generally only need to go back about 3 months worth of price data when doing this, but you may go back as much as 6 months if it looks like there are some relevant levels from back that far.

This takes some discretion and screen time to get good at, but after a little practice you will get confident in your ability to mark the relevant support and resistance levels. For example, if your bias is bullish for the upcoming week, you may look to only take price action strategies to the upside and watch the support levels you drew in for confluence. The opposite is true if your bearish was bias. If you end up deciding that the market is very indecisive right now then you may elect to take a neutral bias for the upcoming week, which leads me into my next point….

The market has a tendency to move in spurts, this means that some weeks you will see consolidation or chop for all five trading days, and then other weeks you will see strong directional price movement nearly every day. Based on the average daily trading ranges for the major Forex currency pairs , Tuesday, Wednesday, Thursday and Friday are usually the best days to trade, Monday typically has a lower volume and smaller trading ranges.

We can see the red boxes show periods of about days of choppy price movement followed by stronger directional movement. Generally speaking, the market will move and then consolidate for a period before moving again, even in trending markets like we see below.

So, by simply doing some analysis before the trading week begins, you can make a good educated assumption about the probability of the market making a strong directional movement in the upcoming week.

Conversely, if the market moved very strong in one direction last week, there is a lower probability for another strong movement this week and a higher probability of consolidation or rotation back to value. These are general statements and are by no means exactly how the market will operate each week, they are observations from years of trading and are good things to keep in mind. Click the following the link to see some excellent price action education videos.

Excellent article Nial and solid advice. Thank you for the opportunity of reading your review Identifying the fx market etc. On your example showing periods of choppy daily markets your boxes are I think are 5 bars in length 5 days is this just an example or are the consolidation periods normally 5 days. Excellent lesson in price action analysis. I find the most important and sometimes the hardest part in trading is being patient and waiting for the right set-up.

Please keep them coming! Awesome article as usual! This is just a great basic framework. Analysis can be complex when really it should be simple. Overtime my past trades over the years has taught me winning and losing trades is part of the game. Thanks coach another great read! Nice article i experinced that mental issue. This article affirmed my way of solving it thanks Coach for the valuble tips. Have a prime mind, an open eye and a relax attitude people.

Then everything will get crystle clear. So true and incisive. Keep it up nial. You are definitely an experienced coach and mentor. This is one of the best articles on trading meant for aspiring professional traders. You have no idea how you have influenced my trading career. Your email address will not be published. Any Advice or information on this website is General Advice Only - It does not take into account your personal circumstances, please do not trade or invest based solely on this information.

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Futures, options, and spot currency trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets.

Don't trade with money you can't afford to lose. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website. The past performance of any trading system or methodology is not necessarily indicative of future results. Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work against you as well as for you.

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Therefore, this fact should help you to see why basing your plan of action for your next trade on your most recent trade s , is simply not logical and is counter-productive, or in other words, it just makes no sense. Take at least a day or two away from the markets to collect yourself and let your emotions simmer down a bit. When you come back, review your trading plan before you look at the charts again and remember what the bigger picture is.

Keeping a record or a trading journal of your long-term performance is a great way to keep the bigger picture in mind. Another way to overcome recency bias is to stick to your trade selection criteria and goals, this will work to instill disciplined trading in you rather than emotion-based trading.

Price Action Signals on the Weekly Time Frame

Action Bias can be used to determine the primary direction to trade the currency pair. That is, one could only consider going long when Action Bias is on the upside and short only when Action Bias is . Live Forex Analysis, Currency Rates, Economic Calendar, Technical Forecast, Fundamental News, Free Trading Signals. Best. USD Dollar, EUR Euro, JPY Yen, GBP Pound, CHF Swiss Franc, CAD Canadian Dollar, AUD Australian Dollar, NZD New Zealand Dollar. Round the clock forex analysis and forecasts, currency news. Trade ideas with push alerts. As price action traders, we tend to overlook the weekly time frame. This is a huge oversight. The weekly time frame can prove to be extremely advantageous when .