If you want to become a successful trader, you should immerse yourself completely in the subject in order to find your edge. In case, you are already a winning trader than you should know exactly what your edge is.
Even the advanced traders find it difficult to interpret and trade the sharp moves often seen in the forex markets. Learning to read and interpret price action can be a huge advantage for you.
In a steep decline, one should be careful to measure the reaction of the longs. You must know if the move has the chance to turn into a rout.
You should look at the reaction of the longs as soon as the rate begins to go south, this way you will be able to determine if the market is sitting on a large number of long positions and whether traders want to dump their positions. In case of a spike followed by a sharp V recovery, you should avoid shorting the pair.
Many buyers entering the market at lower levels tell you that the market is not heavily long. These lower prices mean bargain prices for those wishing to accumulate long positions.
Moving averages (MAs) are among the oldest, true and tested indicators. Widely used moving averages are the 50, 100 and 200 day MAs.
Moving averages are lagging indicators and relate with the past price action. MAs can be used effectively in day trading for entering and exiting positions in one way markets.
During sharp moves, it becomes difficult for the trader to properly enter a position since retracements are far and few.
Moving Averages can be used as dynamic support and resistance levels in such situations. This will give results superior than the static support and resistance levels used by majority of the traders.
The advantages of using MAs this way gives you dynamic levels to trade off and gauge price action. MAs can help you avoid using arbitrary levels when you should take profit.
Even the advanced traders find it difficult to interpret and trade the sharp moves often seen in the forex markets. Learning to read and interpret price action can be a huge advantage for you.
In a steep decline, one should be careful to measure the reaction of the longs. You must know if the move has the chance to turn into a rout.
You should look at the reaction of the longs as soon as the rate begins to go south, this way you will be able to determine if the market is sitting on a large number of long positions and whether traders want to dump their positions. In case of a spike followed by a sharp V recovery, you should avoid shorting the pair.
Many buyers entering the market at lower levels tell you that the market is not heavily long. These lower prices mean bargain prices for those wishing to accumulate long positions.
Moving averages (MAs) are among the oldest, true and tested indicators. Widely used moving averages are the 50, 100 and 200 day MAs.
Moving averages are lagging indicators and relate with the past price action. MAs can be used effectively in day trading for entering and exiting positions in one way markets.
During sharp moves, it becomes difficult for the trader to properly enter a position since retracements are far and few.
Moving Averages can be used as dynamic support and resistance levels in such situations. This will give results superior than the static support and resistance levels used by majority of the traders.
The advantages of using MAs this way gives you dynamic levels to trade off and gauge price action. MAs can help you avoid using arbitrary levels when you should take profit.
About the Author:
Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading and swing trading stocks and currencies. Learn Currency Trading. First Trade Your Forex Demo Account!
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