Proper Timing in Trading06/26/12
When you feel a promising opportunity in trading, the deciding factor will be to know exactly when you should buy. However, that’s where most beginners loose the plot by timing their entry levels improperly. Below you will find basic guidelines that may help you at such crucial moments:
Why buy low and sell high doesn’t always work. Because this traditional rule may appear counterproductive in Forex trading. The matter is that if you really wait for prices to fall, you will end up missing your best opportunities on the market. You should consider what the chances are of the currency pulling back if it starts to pick up, and what will happen if it just doesn’t and steadies out. In the event that you keep waiting for a pullback, you may end up never returning into trading, as most of the changes in foreign currencies happen from new market highs and without pullback.
This means that if you are going to focus your strategy on waiting for an entry at support prices, you can find yourself standing to loose out on the most profitable deals. Instead, your trading strategy should focus on buying high and selling higher. In other words, you should do the reverse of what the others are doing. Just try and keep a lookout for any breakthroughs in support and resistance, after which you can sell and buy correspondingly.
Make proper use of support and resistance. In case you stick to the fundamental rule of the share market (buying low and selling high) in currency exchange as well, you’ll only lose money. First of all, you have to understand how the system of support and resistance works. A support price is a tested price at which you intervene and buy, in other words, you “support the market” The more times it’s tested, the more bankable the support price will become In return, a resistance level is determined as a level where the prices were resisted from moving any higher. The same rule applies here: the more times this level is tested, the more reliable the price becomes.
It takes guts but makes profit. You should be brave enough to go against the crowd. Just think over your strategy with a clear head and you will understand that it’s the most logical thing to do. You might have heard of traders buying into support, while Forex continued its freefall, breaking the support Or you might have heard of the price going to soar and never getting to support, thus making traders miss the opportunity to capitalize on the trend. These examples prove that instead of being traditional and losing assets, it’s better to adopt the breakouts policy: although you won’t be comfortable on entry, you will still be earning money. The secret is to break away from the stereotype that the losing majority sets and to do productive and logical things taking into account the common and predictable response.