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.
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.
Look at the reaction of the longs as soon as the rate begins to go south, this way you may be able to determine if the market is sitting on a large number of long positions. In case, the spike is 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 lagging indicators. MAs can be simple as well as exponential. Widely used moving averages are the 50, 100 and 200 day MAs. Many traders use MAs in making trading decisions.
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.
MAs can be used as dynamic resistance levels in such situations. This can give better results than the static support/resistance levels used by majority of the traders.
The advantages of using Moving Averages this way gives you dynamic levels to trade off and gauge price action taking place. MAs can help you avoid using arbitrary levels in trading a position on 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.
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.
Look at the reaction of the longs as soon as the rate begins to go south, this way you may be able to determine if the market is sitting on a large number of long positions. In case, the spike is 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 lagging indicators. MAs can be simple as well as exponential. Widely used moving averages are the 50, 100 and 200 day MAs. Many traders use MAs in making trading decisions.
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.
MAs can be used as dynamic resistance levels in such situations. This can give better results than the static support/resistance levels used by majority of the traders.
The advantages of using Moving Averages this way gives you dynamic levels to trade off and gauge price action taking place. MAs can help you avoid using arbitrary levels in trading a position on 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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