Filed under Currency Trading FAQ
In today currency trading faq, we have a question from one of our fellow traders. He is asking me what are the forex entry strategies he can use to better find a good entry for his trading.
Knowing when to enter your trade is very important as it will usually determine whether you will get stop out or not. I bet you must have experienced the following where you enter a trade and then the price started to move to your stop loss and then stop you out. Worst of all, it started to move back in your trading direction after that.
The main reason why you are experiencing this is your poor entry strategy. Below are a few of the forex entry strategies that I personally use and hope that it is useful for your trade.
1) Support and Resistance – If you take a close look at the price, you will find that they are moving according to support and resistance. Therefore knowing where is the major support and resistance level will be critical for your trading.
If you see the price approaching a major support and your trading plan tells you to BUY, it is best that you wait for the price to hit the nearby support and then enter a trade. This is because support and resistance levels are like gravity, it will tend to attract the price towards it.
Therefore one good forex entry strategy is to wait for the price to hit a level of support or resistance before entering any position.
2) Stochastic Indicator – You can either use the forex stochastic indicator or the RSI to help you to formulate a good entry. These are oscillators that will tell you whether the price is currently overbought or oversold.
If you are looking to go LONG, you should wait for the stochastic indicator to go oversold before entering your position. This is when the price will most probably move up.
3) Trend Line Break – This is by far what I am always using in my trading. Nothing is more powerful than seeing a valid trend line break. Usually, I will enter a trade when I see a valid trend line break that align with my trading plan.
The trend line break is one of the best entry technique you can have. This is because it is always the start of any movement. If there is a valid trend line break upside, the price will usually move up quite an amount. The problem with trend line entry is the occurrence of fake out. (For those of you who has got a copy of the forex trend line strategy, you will have understand how to identify a fake out and avoid the trade)
Sometime, when you are late and the price has already broken the trend line, what you can do is to wait for the price to come back to retest the trend line and then enter your position.
I hope that you find these methods above useful for you and do feel free to share with us the method that you are using by commenting below.