Getting the Big Picture Using the Stages of Price Movement

Getting, Big Picture, Using the Stages, Price Movement, Technical Analysis, fx trader, forex

“The best trades are always in alignment with the big picture.” Those were words I heard from my first trading coach. It was true. In fact, as I look back at my trades I realize that the best ones took place when I had acknowledged the whole chart first, and then started looking for setups.

Unfortunately, I have seen a lot of traders getting stopped out of trades that were taken against the big picture. I get it. It’s much easier to look only at candlestick patterns or indicators. The problem is, those tools alone do not provide a reliable outlook of a currency pair.

In this article, I want to provide a framework that I use in my trading to take into account the big picture (the whole chart) prior to enter a trade. This, I believe, will eliminate a lot of uncertainty in your trading.

You’ll realize that having the big picture in mind is powerful. It represents the overall movement of the market. As I started getting in touch with other Forex traders, I realized that only a few of them implemented the big picture view in their trading. Those who did, however, had much better results and often felt clearer when the time to evaluate a trade setup came.

When I’m talking about the big picture I simply mean checking what is happening on a price chart as if you were to look at it at a high altitude. You can picture it as looking at the ground when you’re on a plane at 10,000 feet in the air.

The Stages of Price Movement

In order to understand the big picture, I like to refer to a principle developed by Stan Weinstein that he calls “The Stages of Price Movement”. The basic premise of those stages is that the market has four ways of behaving. This works for any currency, stock, or index. The market can either be in a foundation, a rise, a consolidation, or a decline.