Let us understand Trade Mechanics with the help of an analogy. Suppose you had a very good car, sunny weather, an excellent road and the fuel tank full. Perfect conditions to go for a drive? But what if you do not know how to drive or worse, you are a bad driver. If you still opt to drive, if would be at your own risk.
Alternatively, if you are a reasonably good driver, you would prepare for a long trip by checking the fuel levels, the tyre pressure, the weather conditions, the route etc. Once you are on the road, you would respect the traffic rules and drive carefully.
Applying the above analogy to trading, you need to Prepare before you trade to know whether to trade at all and if yes, what to trade. Once you are prepared, Execute the trade flawlessly and then Manage the trade post execution to minimize risk, maximize profit. Makes sense, right?
Well, this is exactly what we call Trade Mechanics, an integral part of our Trading System. It comprises of Trade Preparation, Trade Execution and Trade Management which we would talk about in subsequent posts.
Amongst all the three, Trade Preparation is the most critical as it calls for all your technical knowledge including chart reading skills and application of that knowledge. Additionally it calls for skills that a good trader needs to possess in abundance - attention to detail, diligence, commitment, discipline and experience. If you are able to prepare for your trades well, you have won more than half the battle as execution and management are more to do with rules and discipline.
As we would be trading in 2H candlestick charts, given below is important 2H Candlestick Terminology that we would use throughout the remaining part of this course. It is important that you become very familiar with this.
2H Candle Terminology | Duration (IST) | Trading Action |
C1 - 1st Candle of the day | 9AM - 11AM | No Action |
C2 - 2nd Candle | 11AM - 1PM | No Action |
C3 - 3rd Candle | 1PM - 3PM | No Action |
C4 - 4th Candle | 3PM - 5PM | Trade Preparation starts @ 4PM, Trade Execution @ 5PM followed by Trade Management |
C5 - 5th Candle | 5PM - 7PM | Trade Preparation starts @ 6:30PM, Trade Execution @ 7PM followed by Trade Management |
C6 - 6th Candle | 7PM - 9PM | Trade Exit @ 9PM if adverse conditions |
C7 - 7th Candle | 9PM - 11PM | All Trades Exit @ 11PM. No overnight positions |
If you have questions regarding the Trading Action mentioned above, please park it for now. It will become clear as you navigate the subsequent posts. Please click on "Next Post" to move to Trade Preparation.
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