Analytical tools for Forex and various indicators help us to understand the direction in which the market moves and how most traders are set up. However, nobody is immune from technologies failure while working. A trader needs to be able to work efficiently, therefore, technology should be reliable.
Entrance to the Market
As a rule, traders use various indicators to open positions. In any case, there are several options for entering the market: aggressive and conservative.
Among the aggressive one can distinguish two ways:
- entry at a current market price;
- entrance after the candle closed.
These methods are called aggressive because they carry great risks: the price of a trading position at any moment may leap backward. Despite this, the opening position, after the candle closed, is a classic option.
The entrance to the market in the breakdown of the signal bar, i.e., input at a time when the price broke the maximum or minimum value of the signal candle, is more calm. This methodology allows you to cut off the maximum number of false links.
For example, the indicator RSI crosses the top down 70 and sends a signal to the sale. At the same time, the signal candle was closed by a significant decrease. Opening an agreement at this moment may be reasonable, but it is quite risky. This situation gives only minimal guarantees that the price will continue to decline. Thus, if the deal for sale is opened at this moment, then, as can be seen from the picture, it will lead to a loss.
If you wait for the closing of the next candle, it becomes obvious that it did not break the minimum signal. Therefore, this signal can be considered false. At this point, it becomes clear that an agreement for sale can’t be opened. Only when the second candle breaks, the minimum signal will be able to open a position for sale. If it closes below the minimum of the signal candle, this will be an additional confirmation of the possibility of opening the operation.
Similarly, it should be done with the receipt of the signal for purchase, only in this case, the second candle must break the maximum of the first one.
Disadvantages and Peculiarities of the Method
Of course, this method also has drawbacks. First of all, this loss in points is practically the magnitude of the whole candle. So, if your trading strategy is a priority of scalping, then this method is not relevant.
When using this method, there are several points when it should not be used. So, for example, with the weak volatility of a pair and in general “bearish” mood, it is better not to use a signal to buy. And, conversely, in a bullish movement, the signal for sale is also better to ignore.
The method of trading in the flow of orders, like all other methods of trading, is risky. After all, nobody is immune from a sharp change in prices, for example, as a result of the release of any news. But in such situations, it is always possible to set the Stop Loss level.