Forex Nitty Gritty Daily Video: Patterns On Price Charts And Money Management

As you know, one of my favorite things about Forex Nitty Gritty is the daily videos with Todd Granthem inside the Forex Nitty Gritty Insiders website. Today, Todd went over patterns on price charts using the GBPUSD. There were some points I think are of great importance.

1st… Stick With The Trend

In the Simple Trading Method you are taught to trade with the trend. But sometimes traders see a big move in one direction and the “think” the price needs to start moving in the opposite direction. Basically, they start looking for trading opportunities against the current trend. As you saw in today’s example… the price can keep going in the current direction. Stay with the trend.

2nd… Risk Management

In the Simple Trading Method we are taught where to put our Stop Losses based on what is going on in the charts. Sometimes, when the market is moving quickly, this means the risk can be higher… but also the potential reward. If you are not comfortable with the risk… don’t place the trade!

Don’t be tempted to change the way you calculate your stop loss just because it does not fit your risk tolerance. If the chart determines you stop loss should be 100 pips away, that is what it should be. You can’t just change it to 20 pips because it makes you feel better. You can reduce your exposure to risk by reducing the number of LOTS you trade… but not by the number of pips in your stop loss.

So…

If the stop loss is too high for your overall money management (it would take you over the percentage of your account you risk per trade)… reduce the LOTS. Do not reduce the pips in the stop loss. This way you can still get into the trade without messing up your money management (which is the kiss of death). Don’t break the rules.

If you don’t want to do that… just stay out of the trade. With the Simple Trading Method, another trade setup is just around the corner.

If none of this made sense to you… I suggest you watch the Forex Nitty Gritty videos over again. Bill goes to great length to give you this info about money management so you can become an independent trader. This is fundamental to your trading success.