In today forex FAQ, we have a question from one of our fellow readers asking me what is the right time to enter a trade and below is the question.
What is the right time to put in our trade? I’m conscious of it and hate to trade short time again…really takes a lot of time to do winning trade.
Thanks Koon Hwee.
First of all, I want to say that the purpose of doing technical analysis is to increase our probability of winning a trade. Therefore as long as you have a good trading strategy with good winning percentage and good risk reward ratio, you should have no problem entering a trade.
Entering a trade too early or too late may turn a winning trade into a losing trade. Therefore your entry has to be optimized and the only way you can optimize it is by doing proper back testing. During this back testing period, you will enter with different conditions to see which one gives you more profits in the end.
The purpose of back testing is to let you try different ways of entering a trade to see which one is most effective. However this whole process can easily take you months to achieve.
I have written a post on this back testing some times back and below is the link to the post
Alternatively, you can learn a reliable strategy from a course. As long as it is a good strategy, it will definitely comes with a set of entry conditions. All you need to do is to stick to the entry that the course teach you and it is good enough.
However in order to be able to execute the strategy perfectly which is the key to profitable trading, you will need to first practice it on a demo account until you are able to make consecutive months of profits.
So let me tell you what are the factors you should consider if you decide to formulate your own entry in your strategy.
1) Alignment of Indicators – If you are using several indicators in your strategy, you can consider using the alignment of indicators to trigger an entry.
For example, when you see that the RSI is overbought, MACD is doing a bearish crossover and PSAR is forming a DOT at the top of the candle, you can enter a SHORT trade.
However you must first do a back test in this entry technique to see if it works or not. That is why it could me so long to formulate all the strategies that I am using and I am teaching in the Forex Street University course.
2) Support and Resistance – You can also make use of the price repulsion when it hits a major support and resistance level like Pivot or Fibonacci.
If you are a student of my Forex Street University Course, the Multiple Fibonacci is one major support and resistance that you must use to trade this repulsion as it is very reliable.
Sometime you can also make use of the breach of trend line to trigger an entry but all these have to go through a proper back test in order to know if it works on not.
I understand that it can be very tiring when you are waiting for a trade to occur, however you need to have good patience in trading so that you can avoid getting into trades that is not necessary.
I hope that I have answered your question and do feel free to give you comments below.