Hello delegates of Knowledge to Action, in this article I will be discussing a topic which I see a lot of beginners always seem hard to do, yet it is critical to understand especially if you want to progress to a professional trader.
Understanding the bigger picture. What does this really mean? What it means is that you must be aware of the larger time frames, for example the weekly chart or the daily chart. In doing so then you will know what major cycle the market is currently in and which phase it is in too. Amateurs fall in love with the 5 minute chart and concentrate too highly on that time frame and tend to forget what the bigger picture is really telling you, and consequently enter a trade at the wrong time.
I myself have made this mistake before and was not aware of the bigger picture. This was not in trading, but in my recent trip to the Great Barrier Reef. At first I was snorkelling in the reef and was amazed by the beautiful colour of the coral (refer to photo 1 & 2). The way the light captured it all, was breathtaking. Seeing the individual reefs was truly a beautiful experience I must say.
At this stage I had only viewed the reef from one outlook, and that was close up (very much so like a 5 minute chart). And that is the only way I knew how it looks and I knew no better. I could say I was blind, but not knowing it. After all, you don’t know what you don’t know, unless someone tells you. After snorkelling I took a helicopter tour over the Great Barrier Reef which REALLY changed the way I viewed the reef. I realised that the reef was far greater than it was by viewing it by the sky (refer to photo 3, 4, 5, 6). This was very much like viewing the markets in a daily and weekly chart. It opened my eyes to how the reef system works, just like it makes me understand how the Fx markets work by looking at the bigger picture. I did not realise how blind I really was, until I made the decision to view the larger picture. It put the reef into perspective now.
A great case in viewing the bigger picture has been on the EURUSD. What I was seeing in chart 1 below, is the daily chart and how I could see the euro repeating a previous point in time. This point in time started on the 13th of November, 2012 with a strong phase 1, followed by a phase 2 and another phase 1 before going into a sideways consolidation phase. What we see in recent times is the same pattern reoccurring. The start of a strong phase 1 commenced on the 9th, July, 2013 which lead into a phase 2 and then another phase 1 before heading into a sideways consolidation phase. This caught my eye, and the reason why, was because I was always aware of the bigger picture. There were also some interesting fib lines being hit for our Unlimited Wealth clients to investigate further. The euro broke out of the consolidation period to the upside and there was no surprise that the euro broke out again to the upside in recent times which still appears that it can run further too at the time of writing this article (21st of Oct) before turning around.
Now would I have seen the similar pattern by viewing the 5 min chart? (refer to chart 2 below)I will let you answer that question yourself. Answer it truthfully as you would only be lying to yourself if you did not. The chart below was taken from the consolidation period of the second run.
So in wrapping up this article, I hope I have opened your eyes to the bigger picture and how it will help you make better decisions in your trade selection. My perception changed drastically of the Great Barrier Reef from viewing it from up above, and I hope by viewing the makings from up above (eg, weekly, daily chart) you too will have a better understanding and far greater clarity of the Forex markets.