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The Forex market can lure the novice Forex trader into trading scenarios that appear very attractive at first glance but turn very quickly into a losing trade. Many a Forex trader will relate to this experience:

The Forex market can lure the novice Forex trader into trading scenarios that appear very attractive at first glance but turn very quickly into a losing trade. Many a Forex trader will relate to this experience:

Price has been in a consolidation channel for one or two hours.

You place an entry order to get taken in at the top or bottom of the channel.

Within a few minutes your trade is in and within a few minutes more you are looking at a loss of -10 pips, then -15 pips, and then your stop gets taken out.

It's ironic isn't it? Price was static almost for hours. Yet the minute your trade is entered price moves right against your position and you get stopped out. All you can do is scratch your head and exclaim: "What happened?"

In the early stages of gaining trading experience, it is good for the novice Forex trader to go by a checklist every time before entering a trade until certain habits become ingrained.

With a set procedure in place, the Forex trader is protected from jumping into ill-thought out trades just because there are dramatic candle movements on screen and the trader is afraid to miss the boat. With a procedure, the trader only pulls the trigger when certain criteria are met.

This may of course delay things as you go through your checklist and you may end up missing an opportunity while you make sure all the criteria are met. But better to miss the occasional opportunity than regularly go into trades in a rush and regret it.

The Safetrading Checklist that follows can help make a new Forex trader cautious, so only high probability trades are considered which in turn leads to a preservation of trading capital.

Safetrading Checklist

Avoid Going Long If:

There is negative divergence on MACD on the 4 hour, 1 hour, or 15 minute chart.

The 4 hour and 1 hour charts show MACD pointing down.

Price is well above the Central Pivot Point for the day in a Sell Area.

With the 200 EMA plotted on the 4 hour, 1 hour and 15 minutes charts, price is below the 200 EMA on the two higher time frames but above it on the 15 minute chart. In other words price is bucking the trend.

Price is above a Fibonacci 50, 62, or 79 retracement (calculated from the last high and low)

Your stop is not below multiple layers of support such as a significant previous high or low, pivot point, or Fibonacci level.

Avoid Going Short If:

MACD on either the 4 hour, 1 hour or 15 minute time frames are showing positive divergence.

The 4 hour and 1 hour charts show MACD pointing up.

Price is well below the daily central pivot point.

Price is above the 200 EMA on the 4 hour and 1 hour chart but below the 200 EMA on the 15 minute chart.

Price is below a Fibonacci 50, 62, or 79 retracement (calculated from the last high and low)

Your stop is not above multiple layers of resistance such as a significant previous high or low, pivot point, or Fibonacci level.

The Most Important Lesson

While fewer trades may be undertaken through using a Safetrading Checklist, it does teach the new Forex trader a very important lesson in patience! Waiting patiently for a good setup, a high probability trade, requires that the Forex trader really discipline his mental and emotional energies.

When it comes to the learning curve, this is probably one of the most important skills the Forex trader will have to master. A Safetrading Checklist forces the trader to just slow down and give careful thought and consideration to the array of indicators presenting a flow of information. Once the new Forex trader gets to this stage, real progress can start to be made.