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Trade
Trade a correction in the Forex market
Recommendations to trade in the trend direction can be found at every step, but it happens not so rarely that conclude the deal in the direction of the market trend, and she immediately changes. Not every trader has enough patience and self-control, that would not be in a rush to understand a complete reversal or a short-term correction is now on the market.
To argue about what's better, trading with the trend or against it, apparently in vain, because there are a lot of strategies of both types. Today well take a closer look at the question of how to trade using a correction that would be most profitable to enter the market with the trend.
Will have to start with the selection of a trend detection method on the market that would go to details of the technique. Among the many tools that could help us stop at the indicator Moving Average and ZigZag.
Moving average with the period 50 will show us the direction of the global trend of the timeframe on which we decided to act. I recommend to practice on TF=M5 or M15 are good for intraday trading.
ZigZag allows you to determine the corrected with of the lines connecting the fractals. Those that are directed to one side with MA - we are not interested, but others that go against the middle line (the movement from left to right), just give the opportunity to notice the correction.
Both indicators are in the standard set of programs of the terminal MetaTrader4, so that problems with their search. MA is often used by traders to assess market conditions, identify current trends. In this case, we just use moving average, but the attention we focus on the market price bounces from the trend.
Trade correction: the rules of trading
While the average line is moving in the direction we do not. Need trend movement, and, no matter whether it is ascending or descending, you can earn anyway. For example, MA bends down, which is a reaction to the fall in the price of the asset.
Our task is to wait for the price will be adjusted up and approach the middle line, that we could conclude a deal to sell (sell). From correction can wait until the price breaks through the Moving Average, and it is possible to make a deal as soon as the market gets close to the line of the indicator.
The agreement must be in the same direction as MA, immediately after its conclusion exhibited take profit and stop loss, which we will discuss later. What we need ZugZag? First, it will be needed at closing, and second, it will help to filter out some signals.
For example, when the ZigZag will not allow us to bargain from a market correction. Imagine that the market is growing, MA is not very strong, but tilted up, and that means we can only open purchase. At point 1 the price down, to the line of indicator Moving Average which is a buy signal.
After a brief uptrend, the market reverses down and breaks the middle line at the point 3. In this situation, you should immediately close the position at point 3, since it has not recorded a profit before (simply no conditions, not managed to close with small profit). The idea here would again enter into a buy trade at point 3, because the global trend is the bottom-up and top-down market "came" to MA.
In this situation we need the ZigZag, which will filter out the signal. Please note that the market upward trend, but another local maximum (2) went below the previous value (0). In such circumstances, even if price touches middle line, should not rush with the opening position.
Why is this happening? This one's taken from the theory of alternating local extrema, which are more specializiruetsya Highlanders Vladimir (read more). In this technique, just apply one of the principles of alternation, which here acts as a filter.
Trade correction: the conditions of closing deals
For a start look how to get rid of losses. One option of closing the position has already been described above, but it applies more to cases where the result will be approximately zero. Consider an example in a downtrend, as shown below. Options loss fixing the following:
the next local maximum above the previous one, and both of them over the halfway line;
a fixed value in points, the size of which depends on the chosen trading instrument.
The second option is a safety stop loss and necessary only for those cases when opening a position the price quickly goes against us. The first option allows you to exit with minimal loss in a trend reversal. As soon as the market goes above the previous local maximum (in a downtrend) for a few paragraphs, you should close the loss.
The profit can be fixed on the principle that the market has reached the level of previous local low + pips down. The number of points that is added (X) depends on the volatility of the chosen asset. Another option - when the price reached the previous local minimum, then prepare to close the deal at the appearance of signs of price growth.
This method of trade correction on Forex allows to follow the trend and make deals in the best moments when the price is most favorable. This is trend strategy so you need to use a currency pair with high volatility like EUR/USD, as well as to act in the European and American markets (trading hours).
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| Category: Forex | Added by: (30.10.2017)
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| Views: 1109
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