Forex Trade Bias

forex bias

Forming a trading bias in forex can give you an important edge to your trading, if the market is generally going up then you should only consider going long, it’s always better to go with the market than against it.

How To Form A Forex Trading Bias.

The best and easiest way to from a bias is to look at the higher time frame charts, if you are entering off a swing on the 1 hour chart then you should be looking at the daily chart to find your bias. The daily chart is much smoother than the hourly chart and so it is easier to work out which way it is heading, long term trends can continue for weeks and you should be trading with these trends. It’s not quite so simple as to just look at the daily chart and see where it’s heading, there areas of support and resistance that you need to be taking into consideration. You should always have the support and resistance levels marked out since these are potential turning points on the chart. Although a pin bar for example might indicate a reversal on it’s own, you need to consider the position of the pin bar, if it is in the middle of a trend it is probably just representing a temporary pull back and you should wait until you get a clear signal to confirm a continuation rather than looking to trade a reversal. What will be a range on a forex daily chart will constitute many medium term trend from one end of the range and back again. The longer term charts will give you an excellent framework to work within and limit your trading opportunities, and since most opportunities are one’s that you shouldn’t take, this is a good thing. The more you limit your trading, the better the setups you will take will be, the forex market can be quite unpredictable on the shorter timeframes and this includes the 1 hour chart, and eliminating this factor will improve your win rate.

Trading With Your Forex Bias.

Once you have formed your trading bias, it makes it easier for you to place your Fib tool, since you know where the top and bottom will go and which way the market is heading. Your assumptions might be wrong, but if you have them then you will be placing your trades correctly and you will be able to benefit when the market does go in your favour. Now you have established which way you think the market will go, you can assume that when the price is going against that bias then you can assume it is a pull back and you can use support and resistance levels and your Fibonacci tool to find what are the highest probability trend continuation points. Trading like this will avoid the pitfalls of jumping on the market as it’s moving only to see it go against you and take you out initially before continuing on it’s way without you. Trading forex is about patience and preparation, and forming a bias should be a big part of your preparation for your trading day.

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