Correct trading - entries and exits. Forex trade entry and exit indicators
Today, there are many different systems and strategies. There are so many of them that beginners can easily get lost in the variety, although in fact all trading algorithms are based on basic rules. Therefore, below we describe the main points of entry into the deal, on the basis of which all practical approaches to work on financial markets... Having mastered this material, the trading results will inevitably become better, as the understanding of the market situation will improve many times over.
Working on trends
It would seem that the presence of a trend makes it easy to make money. Actually, it is so, and no one has canceled the saying “Trend is your friend”. But if you look at the actions of traders, it becomes obvious that working within a trend is not so easy. The main problem is psychology. It's pretty scary to buy / sell an asset after it has traveled a significant way up or down, as everyone knows that a big move is followed by an imminent retracement or reversal. Therefore, many readily enter against the trend, which in some cases justifies itself, but in most situations, unfortunately, leads to significant losses, since standing against a steam locomotive racing at full steam is not the best idea.
How to be in such cases and where to find the entry point to the deal? The correct tactic after determining the trend is to search for its pivot points. That is, in order to comply with acceptable risks and provide a large profit potential, you should first draw the trend channel lines and determine key levels support / resistance. After that, it remains only to wait for the price movement to make a correction against the main movement, as close as possible to the zones where the asset quotes will again readily push along the main movement.
Entering along an existing trend near trend lines or support / resistance levels provides a high probability of success, a short stop and good profit margins. Now let's look at individual trade entry points in more detail.
Entry from a trend line
The first signal that works out well is an entry from the third touch of the trend line. Let's consider an example of an entry on an uptrend, that is, when prices gradually rise, which allows us to draw a line looking up at their bases. The screenshot below clearly shows how lateral movement was observed after the fall, and then local minimums began to gradually increase.
As soon as two successively growing lows are formed, you should draw a line through them and wait. And the next time the price touches this level of trend support, you can buy. Such a model in technical analysis is called "Login after three touches."
When opening a trade, it should be borne in mind that the price quite often makes a false puncture, breaking the trend line, but then still continuing its movement along the trend. Therefore, to make the entry more accurate, you can buy not at the moment of touching, but after the first candlestick (bar) closes above the trend line. In this case, the stop loss is placed beyond the extreme lower point of the candlestick that pierced the support. Take profit can be set in a ratio of 1: 3, or better 1: 5. After the price passes the distance equal to the stop loss in the positive zone, the transaction can be transferred to breakeven and the profit can be safely hatched without risking anything.
For sales, the same algorithm is followed, only in a mirror image. It is necessary to find two successively decreasing highs, draw a line through them and sell prices on the third approach. This entry into the trend is the least dangerous and is carried out at the moment of the trend formation, which provides a large profit potential.
Trading breakouts
The rise in prices in most cases occurs in zigzag jumps. Moreover, if an upward trend emerges, then the bears in the first third of it will actively oppose the bulls. Because of this, the price after growth often rolls back to its entire length, after which the upward movement may continue, but not always. Therefore, the trader is waiting for the bulls to gather their strength and prove their superiority. In such cases, a trade can be entered from the support levels according to the Fibonacci line. If buyers are strong, then pullbacks will be capped at 23% Fib or 38%.
The last 38% retracement line is considered the best place to enter a position. The screenshot below shows how, after the growth to point 1, there was first a complete rollback to point 2, and then a rollback after a new attempt to hike the price to mark 3, which pierced the 38.2% level with a shadow.
Point 4 in the considered example acts as a mirror level from point 3. Points 1 and 2 should be interpreted in the same way. After the formation of point 4, it should be used as a level for opening short positions if the price rises again as part of the correction from the fall.
When the market falls, a breakout is formed if levels that were previously identified as extremes are exceeded. Usually, before a significant decline, the market tests resistance and forms false punctures. It is very good to sell in these places by placing a stop behind the candlestick that pierced the level. The 38% Fibonacci level will help to determine a significant resistance zone, but the 23.6% level should also be taken into account, the achievement of which indicates the weakness of buyers and the market's willingness to move further down.
How to act when the market moves according to the rules for entering a deal described above is clearly demonstrated by the following screenshot, in which the level of 23.6% and 38.2% is formed from the segment 1-2.
Entering to break the trend
It is dangerous to work against the trend, but only if there is no good entry point with a short stop and great potential. How can we identify such a wonderful moment and join the new emerging movement, while maintaining adequate risks. First of all, in order to draw the trader's attention to a potentially profitable situation, it is necessary to wait for the prices in the example considered below to break through the resistance trend line on the growth wave.
The trader then waits until a downward correction is formed from this rally. If its lower point turns out to be above the trend line and a reversal takes place, then you can buy by placing a stop above the last local minimum or beyond the level of the trend line, which was previously resistance and now becomes support.
If the movement is indistinct and many oppositely directed impulses are formed, then you can additionally filter entry points and placing stops with an orientation to Fibonacci levels.
To enter a trade against the sell trend, the mirror conditions are met. First you need to wait for the price to break through the support. After that, it should roll back up again and turn around, without reaching the trend line. At this point, you can safely sell by placing a stop loss for a local maximum or a trend line that changes its role from support to resistance.
Fibonacci levels can be used to test the validity of a support breakout. If there are strong corrective levels near the breakout that the price cannot overcome, then this is a sure sign of a trend change and an excellent opportunity to enter a new price movement in time.
Work in flat
Many traders are afraid of a flat, but it is not necessary to do this, since a sideways trend creates excellent points for entering a trade. An obvious opportunity to open a position is an entry from the sideways borders. But working in such conditions is accompanied by strong psychological discomfort, since you have to open against the trend.
But there is another way that will be more efficient and less difficult. To begin with, you should wait until the market goes sideways and outlines the channel in which it wants to be. Next, you should pay attention to its median line and buy if it rises. Accordingly, the opposite is true. A downturn in the midpoint of the sideways trend creates an entry point for short positions.
Thus, having determined the boundaries of the sidewall and its middle, one should wait. As soon as the price overcomes the central axis and rises higher, you can buy. If the quotes fall and overcome the middle, then you can sell.
It is best to use this trading approach within the day or on D1, holding the trade for 2-3 days - no more. But it is better not to take over the center line in itself, but to supplement this initial search for an entry point with the observation of the market, which should show its readiness to move on. Here, too, Fibonacci levels or the formation of some consolidation zones near the middle of the sideways trend may come to the rescue, indicating the market is ready to exit such areas and continue to move. If you adhere to these rules, then the entry point to the trade will always have a clear stop, and the profit potential already needs to be calculated based on it.
The screenshot shows what opportunities observation of the price near the median line of the sideways movement can give.
A trader must be able to identify moments ahead of price action in stocks that have good fundamentals, adequate funding and are leaders in their industries. This is necessary in order to find the entry point in time and buy the security before the start of a strong price movement.
The best point to buy is the support level from which the price can begin to rise. Therefore, it is not enough to choose the right stock, you need to buy it in the right place and at the right time.
One of the simplest and most stable chart formations to buy a stock is the cup and handle. It uniquely determines the actions of the trader.is carried out only when the price approaches the price level, from which a fast and relatively short-term growth can begin.
Human nature does not change. The movements in the market today, as before, are driven by greed and fear. A cup with a handle, one of the most useful tools in a trader's arsenal, which clearly reflects the patterns of behavior of market participants, which makes it easierand choosing the right entry points.
What is the entry point
The entry point is called price level, at which the probability of the start of a large movement is maximal. It indicates the area of the chart where the next move can meet the least resistance.
The location of the entry point depends on the type of base that formed in the stock - it can be a cup with a handle, a cup without a handle, a flat base, a double bottom, etc. the success of the future transaction largely depends.
Let's start with one of the simplest cases - a cup without a handle. This type of base forms when a stock retraces 30% from its last all-time high or 52 Week High (on the daily chart) and then begins to return to its original level. The pullback must last at least six bars. Once the upward movement begins, there should be no significant pullbacks or any movement that could be considered a handle formation.
The buy point in the cup without a handle is easy to identify - it is 10 cents above the top of the left side of the formation.
Procedure in case of occurrenceapproximately the same. When the price returns after the rollback and is 10 cents higher than the previous high of the base, you need to enter the deal.
Entry point on the handle
When price hits a new high, forming the right side of the cup, there is often an unexpected but moderate pullback. Its depth can be up to 15%, but in many cases it is much shallower. Research shows that in successful formations, the price in the pen usually declines no more than 8% -12% from its high.
Also, a good handle should form in the top half of the base. How to determine this? Sometimes it can be seen visually. A handle may begin to form when the stock is just a few cents below the high on the left side of the cup.
If it is difficult to determine by eye, the midpoint can be calculated. To do this, add the values of the maximum and minimum prices of the cup formation and divide this amount by 2. For the handle, you need to do the same procedure.
If the midpoint of the handle is higher than the midpoint of the base, the breakout will have a high chance of success. When a pullback occurs, the positions of many buyers turn out to be unprofitable. So when a stock recovers, these traders start selling, trying to get rid of their positions as quickly as possible.
An example can be seen in the 2016 Seacoast Banking (SBCF) chart. Bank stocks skyrocketed after Donald Trump won the presidential election on November 8, 2016. Seacoast, a Florida-based company, also joined the movement, which took place November 9-14. During this period, its shares rose 9%. The cup with a handle had been forming for about two months, the entry point was at the level of 18.05.
Seacoast Banking Chart (SBCF) for 2016
Cup midpoint: (15.85 + 17.80) / 2 = 16.83. Handle midpoint: (16.82 + 17.95) / 2 = 17.38. As you can see in this graph, the handle can sometimes begin to form even just above the top of the left side of the cup.
Somewhat different. The stock forms a cup shape, but makes another correction before reaching a new high. In this case, the second bottom is usually located below the first. This formation is W-shaped. The buy point is 10 cents above the middle top of the pattern. In some cases, a handle may additionally be formed to provide an alternative entry opportunity.
Regardless of the specific base type, the stock must pass the buy point on high volume. This should give the trader confidence that large investors are buying here too. Volume must be at least 40% above the 50-day moving average plotted on the volume histogram.
In order to make a profit on Forex, you need not only to choose the right direction of the transaction, but also to enter the market in time or, in other words, find the points of entry into the market.
It depends on how much profit you get from one trade, you can take the whole trend or only a small part of it.
The points of entering the market are the most successful places in which a trade will be opened; they can have not only price, but also time parameters.
There are several effective ways search for points of entry into the market, each of the options should be applied depending on the current situation, making decisions based on market analysis.
It should be remembered that it is better to wait and earn more than rush and lose profits.
Forex entry points analysis.
1. The easiest option- this is an analysis of the trend movement on shorter time intervals, first you determine in which direction the price is moving, and after analyzing the lower timeframes, it is best to enter when on the lower timeframe the trend has completed its rollback and started moving in the right direction.
On the basis of this tactic, a fairly well-known strategy of three screens is built, only it uses not two charts, but three younger, current and older ones.
In an uptrend, this will be the low point, and in a downtrend, this will be the maximum. In this case, you can quickly close the deal without risk and make a profit.
This is the principle behind the Three Screens strategy -
2. Usage price channels - price movement always occurs along a curve, and if the fluctuation range is wide enough, so-called price channels are formed.
The most successful entry points to the market in this case will be the places near the support and resistance lines. Depending on the direction of your trade, this is buying at the support line, selling at the resistance line.
You can also work on a breakout, in which case the entry point will be the channel breakdown in the direction opposite to the main trend movement.
You can build a channel manually, by the points of minima and maxima, or using special channel indicators.
3. Based on news- to enter effectively using this strategy, you will need to use a well-tuned news feed. This option will give you the opportunity to immediately determine how the price reacts to this or that event in the world.
As soon as you notice that the trend is actively reacting to the news released, immediately open a deal in its direction. It should be noted that the complexity of the application of this method lies in the fact that the price does not always adequately respond to various news and it is impossible to predict the market behavior with certainty.
4. Reversal locations trend a - they are also one of the most successful entry points to the market, since it is at this moment that a new trend begins, which can bring great profit. You can determine the reversal both visually, observing the price behavior, and using the reversal indicators or on the basis of fundamental analysis, when the reason that caused the price reversal is visible.
In the second case, simply install the indicator and wait for a reversal signal.
5. Entry point indicators- there are also automatic options for searching for entry points, it independently analyzes charts and indicates the places of opening deals using dots or arrows, in some cases it can send messages to the trader's email.
These are not all options for successful entry points into the forex market, each of the traders in the process of work finds their own patterns, so you can always supplement the existing list.
In today's article I will tell you how you can effectively enter the Forex market, namely, I will give 7 proven entry methods that really work. They are quite simple and can be used by absolutely all traders, and at the same time are considered the most in better ways... It is these methods that always give excellent results, while other proven ones fold and give false signals to enter the market. It was these methods that were selected by studying different ways entering the market, moreover, exactly the correct ways of entering. By the way, Forex entry points, which I will talk about below, work great on different types markets: Forex, futures market, stock market. However, I want to note that no matter how you trust any of the methods described below, you still never forget about protective orders.
Trading in a trend
Many people think that the Forex entry point when they trade with a trend is very obvious and very easy to define. And, of course, all traders know the old adage: "A trend is a trader's friend." But if we enter the market when the trend is just emerging and when it is still not strong enough, then this can subsequently bring us losses. It is especially difficult for conservative traders who get used to the current situation and do not want to see or simply do not see the impending changes in the market. The reason, as always, lies in the presence of a psychological barrier.
As a rule, traders think like this: if the trend is established and it is downtrend, then after it starts to go up, many simply do not believe that the trend has changed the direction of its movement, so they continue to sell. The same thing happens when the trend goes up and then there is a slight pullback. Everyone thinks that this is just a temporary phenomenon, so they continue to buy assets. This is where the main reason traders go long at the top and short at the bottom of the market lies. By the way, interesting observations about the middle of the trend. During this time, many investors relax as the accumulated profits allow them to behave more confidently.
That is, the main problem the fact that the Forex entry point for many traders simply does not coincide with the rhythm of the market. And pay attention to the moment that in this case we do not consider cases when a rapid growth of trading begins during the inception of a trend. In this case, we are more interested in how to behave within the trend. And in this case, trend lines come to our aid, which are built on the basis of carefully constructed support and resistance lines, which, in turn, are built on the basis of completed movements. As you can see, it is these points that I have cited above that are important levels that make it possible to enter the market with a high probability of making a profit, and at the same time with a small share of risk. As a rule, in all these cases it is imperative to apply protective orders.
Point 1
We can enter a long position at the point where the price touches the uptrend line for the third time. Typically, an uptrend can be identified in the market when we see an increase in prices. At the same time, when we draw, we can identify an uptrend by drawing an inclined line. The slope should be upward. The line should be drawn at two consecutively higher candlestick highs. The most verified moment of entering the market is when the price touches the trend line for the third time. It is at this point that you need to enter the market. Open a long position. Pay attention to Figure 1.
In fig. 1 shows well how an uptrend developed in the market. However, it failed to develop properly, so the close was above the trend. This, in turn, means that the trend is confirmed and will continue. Those who had not yet managed to enter the market on the first day still had a chance to enter the growing market by opening a long position. True, the effect would have been much less.
But when using this technique, you should still find out in advance the price levels, which may vary. It all depends on when exactly the price will come into contact with the trend. I think the best option is to use the daily chart, and it is advisable to use your own price level for each day. If more verified information is needed, then for these purposes, you can use smaller time formats for market assessment. For example, 30 minute or hourly charts. In this case, an important role is played by software that we use for trading. Bad software can play a cruel joke on a trader. It will simply fail at a crucial moment - it will give an incorrect assessment of the current situation on the market.
True, this technique also has its pitfalls. Namely, false punctures often occur when the price only creates the appearance of a breakthrough through the trend line, but in fact these are only test breakouts. True, in the early stages it is very difficult to determine whether a breakout is true or not. To do this, you need to wait until the candlestick, on which the breakout occurred, closes and until the next candlestick starts trading. By the way, again let us turn your attention to Figure 1.
It clearly shows how the price punctured the trend line, but in the end, the close made it clear that in the future there will still be a bullish play. It always turns out that if the trend is strong, then sooner or later the price will return to it. It is for this reason that a situation often occurs in the market when the price at which the market closes is on the trend line.
At the same time, the probability that the Forex entry point will be correct increases significantly. And even if there is a breakout, the price will still fluctuate around this point for a certain time. By the way, when there is a strong downward price movement in the market against the existing uptrend, this does not always mean that the trend is changing. It's just that often at this time the bulls take a waiting position. They are confident in their abilities and are in no hurry to start the game.
Point 2
Here we will enter the market when the price touches the downtrend for the third time. If you look from a different angle, you can see that this point is a mirror image of the situation that was observed at point 1. It turns out that both the trader's action pattern and the market entry point should be mirror-opposite than those that were in point 1. That is, we need to sell assets when the price comes into contact with the downward trend for the third time. Moreover, you need to be able to determine the presence of a trend. For this, a line is drawn along two successively declining price peaks, which have already been built by the market.
It is clear that it is not possible to say exactly the Forex entry point, because this value is constantly changing as the market develops, it becomes higher and lower. Of course, it is better to use shorter time frames such as daily charts. In addition, hourly and half-hour charts have worked well. But it is always worth remembering that you can only find out if the puncture is true or false only after the next candle closes.
Breakout trading
The ability to correctly identify the breakout points has always been highly appreciated by traders, since this knowledge allowed them to receive very high returns. Often many people think that a breakout trading strategy is a well-placed stop order that is triggered immediately after a breakout and thereby enables the trader to immediately take a very advantageous position in the very beginning of the momentum. And I do not want to convince you otherwise. Of course, protective orders work great. The problem is simply that protective orders are not always practical and do not work in all types of markets. In the sense that different returns are obtained from their use. But when it comes to breakout limit orders, this is a great opportunity to make big profits with little risk. Everything that I will describe in this article is very well suited for trading breakouts. True, it is advisable to act not immediately after the breakout, but during the subsequent correction.
Point 3
Here we will open a long position from support in the zone between the penultimate high and the first of the last downward movement. In the Forex market, you can often observe that when the trend is growing, the price slowly creeps up in a zigzag manner. Fierce bear resistance is seen in the first third of the uptrend. In this case, the price moves up, and the bears knock it down, because they still have sufficient strength.
Therefore, the result is a zigzag upward movement, because the price periodically falls. However, it should be borne in mind that the market is not a place where everything flows and changes very slowly. It is for this reason that sometimes prices simply cannot find support, due to which prices fall even further. In the event that the trend is strong enough, then the depth of decline will rarely be more than 23% or 38% level. last move which was down and which has already ended.
Note that this particular area, which is capped by the penultimate high and the 38% completed down move that was the last, is a great place to buy. Figure 2 shows how the Forex entry point is searched for in order to make a purchase.
Figure 2 shows that the most profitable decision would be to buy in the area between the high of 1 and 23.6% from the 1-2 move. Also, focus on the 38.6% movement level 1-3 from top 1, which has similar data to the 23.6% level 1-2 from top 1. At the same time, lines 1-2 or 1-3, which, in principle , are similar, are considered as a completed movement. Segment 2-4 is a completed upward movement, while segment 4 and down in the direction of the arrow is an unfinished downward movement.
Point 4
Here, a short position is opened in the area between the penultimate bottom and the first Fib levels of the upward movement. Here the situation is somewhat similar, because, as in the case of points 1 and 2, point 4 is a mirror image of point 3, which performs the task of directing us to trade on a short position at a time when the market is correcting upwards. In order to determine when the market is going to fall, you need to know some specifics. In particular, a breakout can be identified when the price breaks above levels that have already been reached at previous price lows.
It is not uncommon for a situation in the market when, with an emerging downtrend, the market recovery raises the price bar to the support line, and punctures often occur. It is in this place that you need to sell assets. In this case, an important role is played by the area of resistance, which must be able to determine. Fibonacci levels will help us with this. Of these, I would recommend using 38% levels for this purpose. In addition, in some cases the level of 23.6% also works well, which will tell us that there is uncertainty in the market and that it is already ready to go down.
Pay attention to Figure 3. It shows very well how to apply in practice all the rules that I talked about above. Namely: level A is calculated at the base of point 1; level B - 23.6% of line 1-2 and, in turn, level C - 38.6% of line 1-2.
Figure 3 shows that there is a sale in the area denoted between bottom 1 and 38% of movement 1-2. This area chosen because it is considered the most correct one to open a short position. Line 1-2 is considered the last upward price move. Segment 2-3 is considered a completed downward movement, and from point 3 in the direction of point 4, the line is considered an unfinished upward movement.
Point 5
In this case, we need to open a long position from the counter-trend, which is at the same time a downtrend. Such actions become very practical if the price of an asset passes it from the bottom up, and the closing is gradually fixed on the time scale that was chosen above the trend line. As a rule, the pattern of actions in this case is standard: as a rule, the price goes and goes through the trend line, after which it fixes, and then, when a correction occurs, the price drops back to the trend line. And now it turns out that a support level is formed on the trend line, which was previously in the role of resistance. It is at this level that the Forex entry point is located, which can be considered the most profitable (Figure 4).
Figure 4 shows how to open a long position from downtrend, which, after the price passed through it, became a support line. And even though the market went down after a while, the trader would still be able to make a certain amount of profit in a 300-point movement in the euro.
Of course, it is always advisable to get additional confirmation of all your actions. In this case, this additional confirmation can be obtained by determining the correction depth using Fibonacci levels. By using this technique, we can also filter out all false movements that only create the appearance of a trend formation, and understand whether in this case it is worth opening a long position from the trend line, or to wait and see what happens next.
Point 6
In this case, we will sell from the counter trend. Opening a long position from a countertrend, which was previously positioned as an uptrend, and at the same time played the role of a support level, and after the price broke this level, it automatically became a resistance level - this is a very correct and reasonable move. This method is used by many professionals, since it is considered one of the most reliable and correct ways to take an advantageous position (Figure 5).
Figure 5 shows how to sell from an uptrend when prices break down, after which it becomes a resistance level. If it closes twice at the trend level, then this may once again signal that the opening of a short position was justified. After that, after a while, the market still went up, but the trader already had the opportunity to make a good profit in the 400-point movement in the franc.
And again, Fibonacci levels come to our aid in order to determine the truth of the breakout. In the event that an uptrend has become a resistance line, and there are correction levels in the immediate vicinity of it, then the likelihood that you will receive a tangible profit increases significantly. And even if we entered the market incorrectly, we still have the opportunity to exit the market without losses. This is possible due to the peculiarity that the market rotates around the breakout point for some time. And only after a while, when he (the market) decides where to move on, there will be further movement.
Sideways trading
Many traders believe that trading when the market is in a sideways movement is very unpredictable and dangerous. Hence the reluctance to trade in a sideways trend. Breakout strategies are not applied here, or they are applied, but they work very poorly. And because of this, trading develops according to the following scenario: after the trader places protective orders, and after that the price goes in the direction that we need for some time, but after a while it reverses, and the trader suffers losses as a result of such a turn. And it is impossible to act in such a way as to buy at the bottom of the trading range and sell in the upper area. Or it is possible, but only a few do it. It is all the fault of a great psychological stress, because you have to trade against the established directional movement. But even in spite of this, there is still one method by which you can successfully trade in the corridor, which has already clearly defined its trading boundaries. Moreover, this trick can be applied both in the futures market and in the stock market and the Forex market.
This trick is based on the belief that when the market crosses the middle of the designated trading range, the price continues to move in the chosen direction with a vengeance. Conversely, if the market drops below the middle of the trading range, then this will indicate that the strength of the bears has prevailed, and then the market will fall. Knowing this feature, many traders trade in a sideways trend in the short and medium term. Moreover, they trade successfully.
Point 7
In this case, our entry point into the Forex market will be the mid-range area. The rules that we will apply in this case are as follows: if the market rises above the middle of the last completed market movement. To enter a short position when the market falls below the middle of the last completed market movement. But it is worth noting that this technique is suitable only for those who practice trading on short-term time intervals. For example, if you try this strategy on time frames over a few days, it will not work. As a rule, the strategy is suitable if you trade within a day, or no more than 2-3 days. But, despite this, the analysis should be carried out on different charts: daily and weekly.
When identifying a 50% border on the market, either one or two successively formed last completed movements market instrument problems usually do not arise. The only thing that is not clear is: "How can you receive confirmation?" It would be a pity, but you can hardly get a clear answer to this question. The point is that it is never clear to the border area how events will develop in the future. That is, there are no signs that would clearly indicate how events will develop in the future. And at the same time, the market looks as if it is ready to move in any direction. That is why the only way to understand the mood of the market will be to analyze its behavior during the passage of the area that shares the opposing interests. In addition, at this point, we will also be able to understand how the market sentiment changes when the critical area is passed. But it is worth noting that the market opportunities will allow us to make a detailed analysis, even without the help of displaying prices on a chart. Exit from the market using this method is quite reasonable and logical. The identified trading area will tell us the point of exit from the Forex market. If we consider other options, the exit may be near the Fibonacci levels. It all depends on how we are set to make a profit. Figure 6 illustrates this point well.
Figure 6 shows how long positions are opened when the price rises above the middle of the formed range, and how short positions are opened when a market instrument falls below the same level. It was at these moments that the trader had an excellent opportunity to profitably enter the market. The market has repeatedly increased from the middle by 10-12%, and also fell from it, and at the same time even by a fairly significant amount. Profit taking took place at the borders of the trading range.
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do you know how it is safe to enter a trade Forex when opening the first order? To do this, you just need to strictly follow several simple rules... Let's recall them:
- - always use stop loss;
- - the maximum loss in one trade should not exceed 1% of the entire deposit.
It's pretty simple, isn't it? Now, based on these rules, let's consider such an algorithm for entering a trade, in which we will risk only at the moment of opening an order. This algorithm is called the Safe Rule. According to this rule, after opening a deal, we can get two situations:
- 1) The price goes "not in our direction" and we get a loss of 1% of the deposit;
- 2) The price goes "in our direction", we close part of the transaction and "are in the market" without any risks.
With the first point, everything is clear - we get a loss and "go to catch" the next entry point. But let's take a closer look at the second point.
Safe Rule when opening a deal.
The purpose of an ordinary safe, which you may have seen in an office or a bank, is to safeguard the funds of their owner. So the Safe Rule in Forex has the goal of preserving the trader's funds. You kind of put part of the profit from the deal in a safe, protecting yourself from possible losses. And it is these rules that will be discussed today.
To trade successfully on the Forex market, you need not only to successfully enter and exit the market, but also try to protect your deposit from being drained. It is for this main purpose - the preservation of the deposit, your trading system should be supplemented with some rules. For example, in which, in the event of an incorrect order opening, the trader will not receive a loss. Although, this is not a panacea - 8 out of 10 trades transferred to breakeven are closed "at zero". We think that you have often come across such a situation - the deal is at breakeven, the price is going in the right direction. But suddenly - it turns sharply, "catches the tail" of the stop-loss candlestick, knocks out the deal and then goes in the right direction. Several points are missing to make a profit! Sound familiar?
There is another possibility to trade Forex safely and close trades opened in the wrong direction without loss. This opportunity is called the Forex Safe Rule:
Safe Rule - a part of the order should be closed with a small profit and in such a way that the profit obtained is equal to the loss if it turns out that the deal was opened in the wrong direction and the second part of the deal is closed by stop loss.
Opening deals "not at random", but according to the strategy, in 80-90% of cases you get a short-term price movement in the direction you need. This movement can be 10-15 points, after which the price is quite capable of turning "against you". How to proceed? The price has passed 10 points - to transfer the deal to breakeven? With a 90% guarantee - the next candlestick order will be knocked out. Although it is breakeven, there is no profit either. Let's consider another option - after the price has passed 10 points in the direction you need, close half of the deal, and set the second SL by the same 10 points. And with this you "kill two birds with one stone" - move the SL by 20 points from the price (the risk that the price will hit the stop loss becomes significantly lower!) And you are already "in the market" without risk!
Graphically, the Safe Rule looks like this:
Rice. 1. The Rule of the Safe in a graphic representation.As you can see from Figure 1, after receiving a signal to enter a sell trade (for example, breaking through an important level), we open an order that is larger than the minimum allowed for your account type and can be divided by two (in order to close half of transactions). The price passes 15 points - we close a part of the order and stay with half of the original deal and, at least, at breakeven. This is a general part of Safe's idea, although in practice it is worth doing a little differently.
The fact is that you may not catch the price fluctuation in the direction you need - and, as a result, you simply will not have time to close half of the order! And sitting and waiting stupidly for the situation you need is not entirely correct. The way out is simple - you need to open two orders with the same volume. As applied to Figure 1, two sell orders are opened with a volume of 0.5 each. Stop loss for both orders is set at 15 points. The take profit of one order is 15 points, the second is set according to your strategy.
Observation from practice! When you open two market orders in a row, in 95% of cases you will not be able to open them at the same price - the difference can be several points. Until the first order is executed, until the broker receives the command to execute the second - the price can easily "fly away" by N points. In this case, the SL of both orders is placed at a distance of 15 points from the price of the order opened "at the worst price" (if this is allowed by market conditions). Take profit of 15 points is also set for an order opened "at the worst price". For you to understand the expression "order opened at the worst price", we will give a specific example. You open the first (sell) order for the EURUSD currency pair at 1.2463, and the second order at 1.2460. An order opened at 1.2460 will be considered "open at the worst price".
Features of the practical application of the Safe Rule on Forex.
a few more points. For the "worst" half of the trade, it is necessary to set such a take profit level, to which the price almost always reaches according to the traded system. As a rule, a distance of 10-15 points with a correct Forex forecast, the price passes in 90-95% of cases. The main TP level can be set in the size corresponding to your trading system... Stop-loss is also set at 10-15 points in the opposite direction. As soon as the price reaches the first TP level, half of the trade is closed, in the window trading platform Terminal, Trade tab, a line with information about the profitable closing of the deal will appear. The second part of the order remains in the market, and how it closes will depend on the price movement. If the price reverses and reaches the SL level, the trade will be completely closed, the size of the loss on the second part of the order will be equal to the profit on the first part, and the overall result will be zero. If the price moves further, then the trader will make a profit on the second part of the order:
Rice. 2. The total profit on a successful transaction subject to the Safe Rules.
one more "trick" when fulfilling the Safe Rule, which may be needed in case of a non-standard situation on the market. Consider this situation on specific example - currency pair EURUSD, deposit $ 16,000, open two trades total volume unit and with stop-losses of 16 points. At the same time, we do not violate - the total loss from the transaction is 1% of the deposit.
So, you entered a trade with a volume of 1, but you understand that you entered incorrectly and the price will not go the required distance to the take profit of one of the orders. For example, TP and SL are set at 16 points, and the price can swing in the right direction by only 8 points. What to do? We close one order with a take profit of 8 points and, plus, close half of the second order at the same price. As a result, we get - 0.75 orders with a take profit of 8 points are closed, 0.25 orders with an SL of 16 points remain in the market. We go to the page and calculate - with a lot of 0.75 and a take of 8 points, we have 60 dollars of profit:
Rice. 3. Calculation of the cost of TP at closing 0.75 lot.
With a lot with a volume of 0.25 and an SL of 16 points, we have a loss of $ 40:
Rice. 4. Calculation of the SL value at the close of 0.25 lot.
In total, we have +60 and - $ 40 for the entire transaction, which is equal to $ 20 of profit. Based on the results obtained, we can afford to increase the SL of the remaining part of the transaction in the market to 24 points, and even if we “catch a moose”, we will not get a loss! In addition, do not forget that we have moved the SL by 32 points from the price - the probability that the trade will be eliminated by the stop becomes much lower!
This is the "beauty" of a safe entry into a trade - a trader takes a risk once, at the moment when he enters the market. If immediately after entering the market, the price reverses without reaching the first TP level, and the deal is knocked out by SL, then the trader will lose exactly 1% of his deposit. If this does not happen, and you close part of the transaction according to the Safe Rule - in the future there is only one possible variant- Receiving a profit!
Conclusion.
We recommend that those traders who have come to this page and are interested in safely entering a Forex trade (Safe Rule), seriously study the proposed information, deal with the calculations of the order volume, the cost of take profit and stop loss, and practice implementing the Safe Rule.
What is it for? Applying the Safe Rule in practice will allow you to significantly improve the trading results for your strategy. And besides this - a scrupulous understanding and implementation of the rules for safe entry into a transaction will allow you to engage, for example, or trading on the news where you will risk only once - when you open the first order. That's it - further trading will only bring you profit! We did not make a reservation - yes, on the news, and only profit! How this is done in reality - will be described in the following articles.
Stay tuned for updates on the AvtoForex.ru website!
P. S. For the convenience of opening two orders with a safe entry into a Forex trade, you can use - the advisor will open two orders with one click with the same stop-loss and different take-profit. In addition, the Expert Advisor can be used to automatically calculate order parameters to accelerate the deposit.
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