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Sunday, 2 June 2019

Simple but effective way to trade Forex

The combination of horizontal lines at support or resistance levels and price action may be one of the simple but effective forex trading strategies. (Note: Price action is a way of trading by observing and analyzing the forms of pin bar formations that occur at candlestick charts).

After determining the horizontal line for the dominant support and resistance, we wait for the formation of the pin bar around that level.



Importance of Horizontal Lines
Maybe we feel uncomfortable with the number of indicators on the trading chart, and I want to be able to trade with as few indicators as possible but quite valid. Now if that's what we want, it might be tried this way, horizontal lines and price action. Professional traders always look at important levels in the horizontal line. They already know that these levels are very significant and have an impact on the direction of price movements.

Horizontal lines can be used as a reference to set a stop loss level, and will be effective if combined with a price action by looking at the formed pin bar.

Application of Horizontal Lines and Price Action in Trending Market Conditions
Consider the following example, at each swing point we can look at the formation of the pin bar that is formed. In fact, swing points are often accompanied by a pin bar formation that indicates a reversal of the current trend. In the case of an uptrend like in this example, the pin bar on the swing point (blue circle) indicates a reversal of the direction of the downtrend correction, or commonly called the end of the correction, so the overall trend continues to rise. For markets that are downtrend, the process that happens is the opposite.

Also Read : How to trade in Sideways conditions

Horizontal Line Application and Price Action in Sideway Market Conditions (Range Bound)
For sideways (range bound) market conditions, we only need to look at the formation of pin bars formed at the support and resistance levels (blue circles in the image below). We determine the timing to start the entry if the pin bar signal really shows which ensures that market conditions are still sideway, and still in the trading range. Stop loss and profit target can be determined at a level close to the support or resistance in accordance with the direction of the position of the entry we took.



"Event Area 'on the Horizontal Line
Event area is an area around a horizontal line that shows strong signals for entry based on price action. From the formation of the formed pin bar, break or retest can occur at a certain price level which indicates that the level is significant. The entry should be confirmed by the pin bar that is formed.

In the following example, the break bar shows a strong signal to sell, after a retest that confirms that the horizontal line is true is a significant resistance (blue circle in the image). We can sell at the level slightly below the retest point.

Example of Trading with Horizontal Lines and Price Action
In the following example, EUR / USD is initially sideway at 1.4100-1.4000 (event area), then breaks down when a pin bar and inside bar are formed. After the retest, prices moved back down.
Pay attention to the pin bar and inside bar that are formed and show the levels where we can enter.

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