As entry and exit to Forex trade is the toughest decision, which traders have to make after spending many hours but then they set back their accounts by taking a poor strategy to exit the Forex market. It is significant to know the best time to enter a Forex trade, which truly depends upon the right entry strategy. Similarly, most of the traders do not pay attention to effective exit planning which ultimately results in shaking out their accounts.
Forex Entry Strategies
Forex Trading can only be successful if traders choose an exact entry point, where they can see the profits coming towards their ways. There are several entry strategies such as analyzing the trend channels, using breakouts, candlestick patterns, trend reversal, and technical indicators.
Analyzing the Trend Channels
Trends can be used as a technical tool to analyze when to enter the market. The traders can examine the fluctuations in prices by following the trade trends of Forex. This empowers the traders to buy at support and then enjoy the profits at resistance. Similarly, the trends analysis shows the bullish and bearish conditions of the market. The traders can draw a line of their prices along with profits and then can track the movements at diverse time intervals. If there is an upward movement in the currency and profits grows up then the trader must open a position and enter the Forex Trade.
“Every exit is an entry somewhere else.” – Tom Stoppard
One of the most widely used entry strategies is using breakouts. The breakout entry strategy is appropriate for beginner traders as it helps in finding and categorizing the levels, which is an indication of trade entry. Breakouts usually involve the movement of Forex prices as its base.
Many reversal trends can be observed which is a good approach of entering the Forex trade such as the wedge, triple, bottom, divergence, head, and shoulder. Reversal can be occurred because of the different major aspects and can be ascertained by visual and by other pointers.
Several built-in technical indicators along with the custom downloaded indicators can be used which tells the traders either to enter the market or not.
- Moving averages is a curve line that displays rapid changes in the fluctuation of the Forex market. It shows an upward and downward movement with the fluctuation in prices.
- Another technical indicator is the Bollinger band which is a mixture of three moving averages. The three averages indicated as high, low, and middle. The middle line shows the moving average while the low level shows low prices and the high level shows high movements in prices. In this way, the traders can analyze the tendency by comparing the lower and higher price level to the middle moving average.
Forex Exit Strategies
“The road towards accomplishments is to opt for an exit approach and take firmed actions.”
Stop Loss Approach
This is the most basic strategy, which must be kept in mind by traders before entering the Forex Trade. A stop-loss must be positioned to avoid heavy losses. Traders can position a stop loss at their breakeven point where they can earn their profits and can adjust their costs. There are several ways where traders can creatively use the stop loss approach such as trailing stop order and protective stop.
- Trailing stop order is regulating by the increase in prices and unchangeable if the market price declines.
- A protective stop is yet another approach where the paired currency in which the traders are trading in, topped and gives you higher profits then at that point, traders can make higher profits and then regulate a stop loss after the prices pass it.
Scaling exit approach
When a new trade generates profits then this approach allows traders to set their stops at their breakeven points, which reflects a free trade approach. After setting the stops in breakeven points, the traders will have the option to either exit the market at once or in parts when the prices lie between the risk and reward ratios.
“Success comes to your ways when you become optimistic because optimists always observe an opportunity even in a struggle and pessimists always observe a difficulty even in an opportunity.”