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.
The sharp moves often seen in the forex markets can be difficult to trade and often interpret even by advanced traders. Learning to read and interpret price action can be a huge advantage.
When the market is going in a steep decline, one should be really careful to measure the reaction of the long positions. You must try to understand if the sharp move has the chance to turn into a rout.
By looking at the reaction of the longs as soon as the rate begins to go south, you may be able to determine if the market is sitting on a large number of long positions. If the spike is followed by a sharp V recovery, you should be wary of 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.
As said before, moving averages are lagging indicators. They relate with the past price action in the market. MAs can be used effectively in intra-day trading for entering and exiting positions in one way markets that are trending.
During times of sharp moves, it becomes difficult for the traders to enter a position since retracements are far and few. This makes them confused and forces them to start taking arbitrary decisions.
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.
The sharp moves often seen in the forex markets can be difficult to trade and often interpret even by advanced traders. Learning to read and interpret price action can be a huge advantage.
When the market is going in a steep decline, one should be really careful to measure the reaction of the long positions. You must try to understand if the sharp move has the chance to turn into a rout.
By looking at the reaction of the longs as soon as the rate begins to go south, you may be able to determine if the market is sitting on a large number of long positions. If the spike is followed by a sharp V recovery, you should be wary of 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.
As said before, moving averages are lagging indicators. They relate with the past price action in the market. MAs can be used effectively in intra-day trading for entering and exiting positions in one way markets that are trending.
During times of sharp moves, it becomes difficult for the traders to enter a position since retracements are far and few. This makes them confused and forces them to start taking arbitrary decisions.
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 has done Masters from Harvard University. 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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