Potential Trading Area

You need to have a valid reason for every trade you enter. This is also known as logic or rationale.

You are not a caveman. Nor are you a gambler, right?

Why are you looking at this area to enter? Where are you looking to pull the trigger?

This area is determined by whatever setup detection method you have written in your Trading Plan.

An example might be the crossover of two moving averages or price hitting resistance on a Fibonacci retracement level.

Your potential trading area stands between the current price and your entry trigger.

We strongly suggest you take a screenshot of your chart showing this area. Try to make a habit of taking screenshots of your charts.

When it’s time to review your trades later, having the ability to see what happened visually will help train your eyes to see possible opportunities or traps to avoid on your charts in real-time.

This will help you remember the reason why you entered the trade, or make you realize some things that you may have overlooked.

The potential trade area is where you believe you will have an edge that you trade with a high probability of success, and that reward/risk ratio is in your favor.

You must determine, for yourself, how you want to meet this requirement.

When you sat down in your chair in front of your screen, you were “ready” to trade. The potential trading area is where you “aim.”

This will keep you from entering a trade without a plan and shooting from the hip.

Reprinted from Babypips, the copyright all reserved by the original author.