Picking the direction of a trend is relatively easy, getting in on it and dealing with volatility is the bog problem.
You need to deal with volatility, so you can place your trade and have your stop in such a place, that a volatile price movement doesn't take you out. It happens all the time, a trader places a trade, he then gets stopped out and the trade goes back the way he thought, piling up thousands or tens of thousands in profit and he's not in!
Here are some ways to get in your trades, with the best risk to reward and not get stopped out to soon.
1. Never Day Trade or Scalp
All volatility is random in hourly and daily periods and you are going to lose as you cannot get the odds on your side. You see lots of vendors selling day trading and scalping systems with track records but there all simulated backwards! You will lose, so don't try it.
2. Be Patient
Most traders lack the patience to wait for the big high odds moves but keep in mind you don't get rewarded for trading often you get rewarded for being right. Here are some high odds set ups to look for.
3. Getting in on New Trends
Trade breakouts to new chart highs or lows that have been tested a few times, all new big trends start and continue from breakouts and there is a huge advantage in trading them. You are trading the reality of price change and on these high odds breakouts volatility may be high - but it's on your side, if you buy or sell the break and your stop is tight under the breakout point.
4. Getting in on Existing trends
Prices get overbought and oversold and re trace and if you want to know the value area, look at how strong trends always provide a low risk entry point around the 20 day moving average. It works and is the ideal place to look to enter a trend in motion.
5. Using High Volatility to Your Advantage
It's a fact you can trade with low risk when volatility is high, as short term price spikes never last and they can be the end of a trend or in an existing trend.
The key is to watch for exhaustion of the move via momentum indicators and wait for momentum to drop then trade it with a tight stop. With this method you have a great risk to reward.
Trade to Win
These are just 5 points to keep in mind which if you learn them and make them part of your Forex education can help you deal with volatility and get some great risk reward entry points.
Make Learning About Standard Deviation of Price Part of Your Forex Education!
In part 2 of this article series, we will look at how volatility is measured via standard deviation and a great Forex indicator - the Bollinger Band and how it can lead you to currency trading success.
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