Learn the trading logic of this big boss, no longer blindly make orders

Content source: Wechat public account Huiclassroom

What do technical traders look at when they look at charts before trading? How did you make the judgment?

Your chart may be more complex when trading, support and resistance lines, trend lines, indicators, chart patterns, and multiple time period switching, etc. If there is no set of judgment logic, it may be interfered by various signals.

Trading masters have their own judgment logic. They are verifying their ideas through the market, so they can make trading decisions quickly.

For investors who don't know how to analyze transactions, they can focus on the following four elements and form their own judgment logic.

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The first element: market structure

It means to judge whether the market as a whole is in an upward trend or a downward trend, and then decide whether to go long or short.

When the market makes higher highs and lower lows, it's an uptrend and all you have to do is look for opportunities to go long.

When the market makes lower highs and lower lows, it is a down structure and all you have to do is look for shorting opportunities.

If the overall structure cannot be clearly seen from the chart, it can be adjusted to a larger time period. For example, when no obvious trend can be seen on the daily chart, it can be adjusted to the weekly chart until an obvious trend can be seen.

As shown above, in the daily chart, there is a consolidation trend, an upward trend and a downward trend, and the overall market structure cannot be seen. After adjusting to the weekly chart, it can be seen that the overall market is in an upward trend. You can look for long opportunities in the late market.

But what needs special attention is that if you really can't see the market trend, you still have to trade cautiously, and stay away from trading if you don't understand.

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The second element: value area

After the market structure is determined, the next goal is to determine the value area that can be traded.

Although the market is in an upward trend, it does not mean that you have to enter the market immediately to do long, because the market price may pull back at any time. So we have to find out a tradable value area. Value areas can be defined in a variety of ways, such as support and resistance levels, trendlines, moving averages, channels, and more.

For example, in the AUD/CHF trading chart below, 50MA, support and resistance levels are used to define the value area. The AUD/CHF daily chart is in a downward structure, and the market price has 4 backtests under the 50MA.

You can also draw the corresponding support and resistance levels. These are all potentially trade-related positions.

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The third element: entry trigger

To determine the tradable area, you also need to find the trigger to enter the trade. Common trading triggers include K-line patterns such as engulfing patterns, meteor lines, hammer lines, etc., market structure disruptions, trend line breakthroughs, overbought and oversold indicators, and so on.

For example, in the picture below, the market price breaks through the original low support level, but it shows a bullish pattern of Venus, and the price rises instead. Trigger entry to go long.

As shown in the figure below, it is a trigger of structural destruction. The market was originally in a downward structure, but in the support area, the market price began to reverse and destroyed the original downward structure. At the same time, it is also a K-line reversal pattern trigger.

The following picture is the trigger of trendline breakthrough. It is worth noting that within the value zone, trendline breakthrough can enter the market. If it is not within the value zone, trendline breakthrough is not an entry signal.

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The fourth element: export

The exit is where you will close the trade. That is, your stop loss or take profit position, stop loss is the place where the conditions of your transaction are no longer valid, and take profit is the profit closing target you set up.

For example, in the GBP/AUD chart, the market structure is in an upward trend, and a bullish hammer line appears in the support area in the figure below, so enter the market and do long.

Where will you set the export? The stop loss can be placed below the support area, at which point the support area has expired. At the same time, you can also set a stop profit at the high point above, which is a fixed profit target.

Of course, instead of setting a fixed take-profit position, you can follow the market trend and follow the stop loss. For trailing stop loss, moving average line, chandelier stop loss, etc. can be used.

The above is today’s sharing. A complete trading logic is to judge the market structure, draw the value area, find the entry trigger, and set the exit position. If you master these, you will not be blindly staring at the market when analyzing the chart.