Trading is not an easy job. Even for experienced traders, picking up good entries is not an easy job. When I am approached by new, soon-to-be traders, these are questions that I often hear:
- What is the best order type in Forex market?
- What are the different order types?
- How to place pending order in Forex?
- How to use limit orders in Forex?
- How to place a trade in Forex?
- What is a pip in Forex?
- What is margin in Forex?
- What is buy and sell in Forex?
- What is Forex trading all about?
Most of these questions have already been answered. But as you could read above, some of the questions are about which kind of order types and entries one should make and when.
When it comes to trading Forex, many traders simply want to jump on a freight train but they end up buying much higher, near the top of the range at resistance. Since the trader's entry price is so far above a level of support, the risk simply doesn't justify the reward.
This usually leads to a loss as price begins to retrace and the trader is unable to handle a drawdown. It happens because traders think that they will miss potential gain. So, sit back and relax as I tell you about the most effective ways to place trades.
There are four main ways to place your trades. I always differentiate between:
2. counter trend
4. scalp entries.
There are many different ways to trade. Depending on market conditions, account size and our own personality, we ultimately choose which kind of entry we want to make.
We traders usually say: "Trend is your friend". Forex currency trends are divided into three types according to their direction: uptrend, downtrend, and sideways trend. Duration is also important. For intraday and intraweek swing trading, major Forex trends are determined on daily and H4 time frames.
Intermediate Forex trends continue to form on H1 timeframe and M15 timeframe. In order to follow major trend, we usually wait for retracement and zoom in lower timeframes to make entries.
Two main principles in trading trend-based entries are:
- buying when price is oversold (when major trend is bullish)
- selling when price is overbought (when major trend is bearish).
Other ways to trade trend is to look for rejection zones where price might be bought or sold. Those zone I call POC™. I am the founder and creator of CAMMACD™ method that exploits POC zones perfectly and with unmatched accuracy in Forex trading.
Source: Personal account statement*
*Past performance is not necessarily a guide to future performance.
Counter Trend Trading
Counter trading is taking trades opposite to trade direction. Trend trading has certain inherent advantages that stack odds in your favor from a statistical standpoint. Psychologically, however, it is easier to counter trend trade as this style of trading has the idea of determining tops and bottoms for a given market price.
Counter trend trade can be very profitable, though in order to trade counter trend, traders need to be patient and wait for the right spot. The main thing in counter trend trading is finding a confluence of ATR stops, historical levels of support and resistance, and pivot points.
Breakout trading exploits high momentum in Forex currency pairs. The strongest breakouts are usually followed by stop grabbers or profit taking. Taking proper breakout trades requires focus and experience.
Most traders who start out with breakouts quickly become aware of the negative sides of this approach. I have been using my own Master Candle approach that can be learnt in Price Action Trading School.
Scalping is short-term trading where traders want to exploit volatile price movements in lower timeframes. Whereas intraday traders might be looking towards taking positions that deliver sufficient returns over the course of the trading day, scalpers are looking to trade over the micro-term—often around an hour even minutes—with a goal to taking a quick profit.
Main question that you might ask is how to decide which kind of entries we should look for. The answer is simple. By gaining experience you will be able to identify different chances to trade the market. The rules that I have set up myself and that I teach traders are very clear.
- We start to trade with trend based entries – so-called positional trades.
- If we are late for positional trade we might turn to lower timeframes and scalp the trend.
- If we don't have any valid scalping setup, we might wait for breakout trade.
Ultimately if we are too late for any of tactics above, we can wait for a counter trade opportunity that will usually arise when ATR has been overshot and divergence forms at important support or resistance level.
Wolfe waves are one of the great trading approaches for counter trend trading. There are some traders that I personally know, who trade exclusively counter trend opportunities.
Cheers and safe trading,