When analyzing the current situation on Forex, a trader determines a number of moments to open the position: the buy/sell direction, trading volume, risks, potential etc. After setting these moments, they make a deal. Forecasting and determining of the moments conducting a trading operation appears as a difficult element of trading on each trading market – Forex, stock markets etc.
When making a final decision about the position entry one takes into account dozens of technical factors, recommendations about the management of capital, choice of the order type and others. The difficulty of the precise forecasting is compounded by the speed of making the decisions as a trader seldom has days or hours, and in the majority of cases only minutes and even seconds. To act effectively, one will need to bring the popular Forex trading tactics to the reflective performance.
Each trader knows that the break of a strong level appears a checked formation for opening a deal. But how can you do it when you can:
* Enter a position prematurely, expecting a break;
* Open a deal enter at the moment of direct going of the prices through a holding barrier;
* Wait until a price which has broken the level, rolls back, attaching to it.
Each of such approaches demonstrates both strong and weak sides and the experienced trades use such combinations of Forex trading tactics. For that, the work volume is conditionally divided into three parts and after that 1/3 go in advance to the break with a short stop, another 1/3 are thrown to the market at the moment of break and the remaining part is filled up when rolling up. The choice of the moment for entry, if the trading volume does not allow using a fractional lot, depends on the aggressiveness of the trading style and the amount of money which is at risk of the deal.
Careful and experienced traders enter in 100% of cases on the pullback while aggressively trading ones do it beforehand. In the first case, the desire to act conservatively leads to the fact that a trader loses a part of the profit and sometimes the deal itself as not in every case the price makes a pullback after a break and can draw 2-3 candles with a long body without any corrections. As for the aggressive approach, here there is an increased risk to take a stop, but if the break will go on a big price impulse, the profit will be 5-10 times bigger than risks.
To draw the trend lines, it is necessary to connect consistently the dots of local minimums and then maximums. This will mark the price channel where the work is done with the support on the levels by taking into account the fundamental technical factors, too.
The trading tactic of Forex is marked precisely here. On the rising trend, they buy at the coming of the price to the lower trend line and sell at the reaching of the upper one. On the undergoing level, on the contrary - they sell from the upper border and buy from the lower one.
The break of the lower line on the rising trend act as a sign pointing on the exit from long positions and the probability of an accurate entering into a short deal. In the reverse order, it is true for the falling tendency.
No matter which trading strategy is used, every wise trader draws horizontal levels of support and resistance which help identify the trend. The resistance break gives an entering point into a long position while the stop loss in such chases is put behind the last local minimum or on the level itself. For the support, a reverse algorithm is used for the support.
If there is no power for a break and the price has got back to the resistance for 2-3 times and jumped back, then, at the next approaching, especially when it happens at lowered volumes, they sell for a jump back, putting the stop behind the level.
On a growing and falling trend, the price is moving steadily, from time to time making the pullbacks within the frames of Fibonacci percent levels. This is used by the traders for opening the deals or filling the volumes in already hold positions. Such trading tactic of Forex allows increasing the volume safely and open position on the trend with minimal risks.
To open/add a position the traders base on the correction pullback of 38% and 63%. The first one effectively fulfills itself after the break of local levels and 62% give an entering point from strong price impulses when a massive pullback from a long moving is coming.
The use of these Fibonacci levels improves the trading results, which is why everyone has to master the tool for the determination of percent pullbacks and use them in practice.
Often, on the diagram there are price gaps, also called spaces. The borders of such gaps are used as support and assistance. If the price after gap has headed for growth, then the upper border of such gap will become a profit fixing point, when the quotes unfold. At that, a break of such border will give a new entering point as in this case, the tactic of gap overlap will work perfectly.
When averaging it is necessary to base on technical factors of price movements, possessing a sufficient deposit. Otherwise this tactic appears unreasonably risky and it is worth refraining from using such an approach. The idea of averaging is based on the market nature which is moving not in a straight line up and down, but in form of consistently coming growths/falls.
This makes a trader expect, that at the opposite price movement it will grow a losing position and make the entry price better for himself, and after that, when having caught the pullback, the deal will be leaded to the plus or at least to no-loss.
It is easy to imagine what will a long price movement without pullbacks make with the deposit. For this reason, the experienced traders advise not to use averaging, and as an alternative careful trading tactic of Forex, they offer to fix the allowable losses and go against the movement when
the plundered formation with a short stop loss will appear. In such cases, the scalpers allow the increase of trading volume, which covers the previous minus and brings profit.
Variants of the use of trading skills. The trading tactics of Forex described above are used for the earnings on the long-term, middle-sized-term and short-term periods, which differ in the specifics of the use of approaches.
1. Long-term trading acts as the investment option. Here, the position is held for weeks and months and is insured with options for the safety. The maximum of profit is guaranteed with this approach on strong trends and is ineffective by side movement or a weak tendency. When analyzing the current situation, an investor has to base on technical and fundamental analysis.
2. Middle-sized time frame suggests that the deal is held open from 2-3 to 5-10 days. The advantage is the stability of technical analysis and tangible profit.
The fundamental analysis shall be taken into account, but it does not get such influence like on long-term practices.
3. The third type is the short-term trading within a day – the lot of the professionals. The use of technical analysis is made difficult by impulsive actions of big players, and the costs for trading are high enough – spread, commissions etc.