How do you trade? How do you know when a lot of volumes come in?

In this episode of Truth About FX, Walter gives insider tips on the best method to find your trade’s momentum. He also talks about market movements, indicators, and shares an important tip: look at your candles and observe their pattern.

Download (Duration: 05:32 / 6.33 MB)

In This Episode:

00:57 – lot of volumes

02:08 – momentum

04:00 – qualifiers

Tweetables:

You’ve got to trade how you believe. [Click To Tweet].

How do you trade?  [Click To Tweet].

Look for really big candles and stick to them. [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hi, Walter. This is another listener’s question: What do you find is the most effective method to qualify momentum, either in a breakout or trend continuation situation? Do you use price action or something else?

Walter: There’s a couple of ways to do it. I do not use indicators, obviously, but what you can do here is you can look at the candles. Actually, one of my students years ago, he get a trivia on this idea where because he was saying — he kept showing me his charts and say — “How do you trade?” and stuff like that?

He was showing me a strategy and said “This is where a lot of volumes comes in” and I’m like “What do you mean? How do you know a lot of volumes comes in? Like, this is forex. Are you falling your broker’s volumes because that is just your broker?”

It’s a totally different market, really, and things like that. What he was talking about was basically momentum. He said “You can tell momentum when you see these really big candles”. I guess it’s true.

It takes a bit to move the market, it takes a bit. It takes enough buying power to move it up and it takes enough sell to move it down so, you can tell. In fact, I saw a presentation at one of the FXstreet.com conferences which I was lucky enough to present at a couple of years ago.

He was the guy from Oanda. He was one of the co-founders of Oanda. He was showing us how it doesn’t actually take that much to move the market at any given moment. Move it up a pip or so, it’s really not like that and it’s surprising how little it takes.

Obviously, if it is a big candle, that means there’s a lot more behind it. I think the easiest way really is to see momentum in the candles. How do you do that, the question?

The answer for me is I look for really big candles. I think that you’ve got a lot of bullish momentum when the candle that you see is bullish, it is bigger than the last ten candles. The ranges are bigger and it closes right up near the top.

That would be a sign that “Look, we are going in to some bullish momentum here”. Likewise, if you had a downside or a reason to go  bearish in the market, you might see a really big bearish candle, bigger than last ten whether closed down near the low candles.

This is the thing I would be looking for now. It is a little bit more complex than that. That is a basic idea.