forex training should help you identify support and resistance. It is all well and good to know where the support and resistance areas are. It is great to know which direction the trend is going. (Multiple time frame analysis is presented in another article.) But now how do you enter at a wise time?
You know there is no guaranteed best method. But here are some tips that could help that are taught in many forex trading courses and books.
First, avoid buying 10 to 20 pips before potential resistance. The reason is, the market may bounce off that area and stop you out OR reverse.
Second, avoid selling 10 to 20 pips before potential support. The same reason applies, the market may bounce off that area and stop you out OR reverse.
Third, make price prove itself. Many traders are concerned about head fakes. One measure for that is to let the market break the area of support or resistance, pull back (or stall), and then enter when the trend line is broken.
Fourth, watch your trend indicators. If you trend indicator is showing divergence (divergence will be covered in another article) or decreased momentum, the market may pause or reverse. So you might want to watch the price rather than just jumping into a trade.
Fifth, when in doubt, don’t! If you are unsure or uncertain, you might want to wait before entering. However, you might want to write down clearly in a trading plan (we will present trading plans in another article) what you are waiting for so you know when you might want to enter.
Sixth, look for multiple reasons to take the trade. For example, if a trader is interested in going long on the EURUSD and has a trend indicator indicating a bullish trend for the EURUSD, the price has bounced off the support (that was previously resistance), and positive news was recently announced for the EUR, then that trader might decide to go long. However, such a trader might be wise to use multiple time frame analysis to time the entry.
Seventh, use trend lines. For buys wait for a pullback and when trendline drawn over the highs is broken enter long. For sells wait for a rally and when trendline drawn under the lows is broken enter short. Eight, use a stop! I have been told that many professional traders use stops in case the market suddenly turns against them.
Finally, look at momentum indicators. Most forex software have momentum indicators to help traders decide if the momentum is going strong, going steady, slowing down, or dying off. These trading tips are just some that traders use to help them make decisions about when to take a trade or stay out until certain, more favorable conditions are met.