7 Forex Trading Tips and Tricks

forex trading

These are the 7 best trading tips that will improve your trading results.

1. Enter your trades near market structure

This is how not to do it. Look at the first picture, and let’s say, for example, the red one here is your stop loss, the green one is your entry point, and the blue one is your, so-called take profit level.

Stop loss, entry point and profit level

Traders will see this chart and say that the price is coming down, lower and lower. Let me, hop on board and before you know, I miss the move. So they go long in the green area, half their stop-loss at the red level, which is a distance away from the highs and then they target at the nearest swing low. That is a very common thing that you know traders would do.

But when you look at the second picture from a risk to reward perspective, you can see there you’re in fact risking up a dollar to make like 40 cents.

risk to reward perspective

If you want to improve your risk to reward, you will need to trade near the market, you can see that in the third picture.

new enter

The only difference is now you’re entering at the much favorable trade location, a market structure in this case near resistance. You won’t necessarily go short, because you might want to wait for a reversal candlestick pattern like a shooting star a bearish engulfing pattern before you kosher. So perhaps the price may come up higher and then get smacked down lower and close lower.

Now look at the fourth picture and here you can see that from a risk to reward standpoint, let’s say you know it closes lower, your stop-loss is still at this level. What happens now is that you’re not going to use a sell limit order. You are letting the price go up and then come down and close lower somewhere here.

New risk to reward

You can see where is your new entry, where is your stop-loss, your risk and your reward is now from your entry point to your target profit. Now you are risking a dollar to make a dollar fifty or even two dollars. Your risk to reward has been improved just because you are trading near market structures.

 

2. Breakouts with buildup

The second tip is that you want to trade breakouts with buildup. So what is buildup? The buildup is a tight consolidation where the range of the candles gets smaller and smaller. So you can see that on the first picture blue box, and that is what we call a buildup.

breakouts with buildup

Price and resistance it usually would have selling pressure. Traders might want to consider shorting a resistance in your market structure. Now, what happens is that after 10 or 15 candles, the price is still hovering at resistance. And that is telling you that the selling pressure it’s unable to push price lower. All of that is happening because there are traders that are willing to buy these higher prices. And that is why the price can’t go down, so this is a sign of strength.

Because you know the price is still hovering a resistance, buyers are willing to buy these higher prices and willing to buy in front of resistance because they have the expectation that the price will break out. Whenever you see the price forming a build-up like on the third picture, that is a (see on the picture)that is also a sign of strength at the market is likely to break up higher.

3. Higher lows = sign of strength

This is a sign of strength that a market is likely to breakout higher. Another variation of this is what we call higher lows into resistance.
This is a sign of strength, as well. On the first picture, you can see the higher lows into resistance.

Sign of strengthThe concept is somewhat similar to the buildup, but this time ’round, it’s telling you that buyers are willing to buy at this higher price instead. It’s why you see higher lows into resistance.

4. The first pullback

Often, the price can break out and if it breaks out you might have missed the move. if you didn’t catch the breakout, don’t worry, because the price will give you a chance to re-enter, to catch the trend. In this case, you can use the first pullback technique that I am about to share with you. On the first picture you can see that the price break out, so those of you who missed the move, the market offered you an opportunity to get long by forming a bull flat pattern so what it can do is to treat the first pullback.

Breakout with pullback

 

The price does break above the swing high and you can get you low and possibly have your stop-loss just a distance away from low. Maybe right above, away from swing low. There is always an opportunity.

5. Set your stop loss away from the market structure

For example, the market is in a range like you can see on the first picture and traders go low and price hits up higher.

loss away from market structure You can see that their stop-loss is below the level of support. And what happens? Well, the market could just as well come down lower, trigger their stop loss, and then continue higher. So this is why you don’t want to put your stop-loss just below support or just above resistance. What you need to do is to set your stop-loss a distance away from the market structure.

How do you do that? It’s very simple, On the second picture the market is somewhere in a range, traders can see that it is an area of support price tested four times.

loss away from market structure

There is a candle that has pretty much taken out some of the lows. This one candle has pretty much wiped up all the stop-loss. This is why you want to set your stop-loss a distance away from the market structure. How do you do this?

It is very simple, firstly you can try to see with your eyes. By doing this, you would set your stop-loss, like on the third picture.loss away from market structure

Alternatively, you can use an indicator like the average true range that measures the volatility of the market pull out this indicator and it will give you a value called X, then you will need to subtract that value from the value of the low. If the value is the market price level and support is a hundred dollars and let’s say X is ten dollars, you put your support at ninety bucks. Pretty simple, and that is how you protect yourself from getting stopped hunted.

6. The False Break

The sixth tip is entry technique, to profit from traders who low breakout, and then they got trapped. This is what we call the false break set-up.
On the first picture is an area of resistance and market broke out of resistance on this candle.

the false break set-up

The market has not closed yet through the day, the sellers push price lower and finally, it’s closed, like on the third picture. The psychology of the markets is that now breakout traders are trapped. And if you think about this, where did the breakout traders put their stop-loss? Chances are they put stop-loss may be bellow, like on the second picture, or even lower for those of them who are really conservative.

the false break set-up

Now you can expect that If the market continues lower, It’s going to hit this stop others, this sell stop others which is the stop-loss orders of the breakout traders. And it will induce further selling pressure.

So this is why you can expect the market to continue lower. It’s not guaranteed, but it’s a good chance that it will continue lower after this false brick price pattern. We can use this false break as an entry trigger to get on bought trends. And this is a psychology behind the false break setup.

7. Use limit order for better R:R

Look at the first picture, you can see a chart of Euro Yen for our timeframe.

Use limit order

Okay, so, this is a very typical set-up that traders will trade prices at an area of support. And then, this bullish reversal candle is so bullish? You suddenly just hit a massive reversal, and close near this highs over here.

If you follow the techniques that I will share with you, you do want to set your stop-loss just below the level of support. Your Stop-loss is going to be your entry.

 

You can see that your risk on this potential is very large, this is the distance of your stop-loss. If you don’t want to trade it and I can understand, it’s because If you have a larger stop-loss you have to reduce your position size but still have proper risk management. You might not want to take the trade because the stop-loss is very large so what you can do is to use a limit order to have a title stop-loss and in turn, you can increase your position size on this trade.

Let’s say you decide to use a limb in order and you put it say a limit order somewhere you know a Fibonacci level maybe justice from this swing high and you identify the 50% level mark just that is where you will enter the treat your new entry is now over here like on the second picture.

Use limit order

Now you what you will notice that your stop-loss this distance of it has been reduced right now is that is the distance of your stop-loss.

Alright, and from a risk to reward standpoint you have improved on it right instead of you know by near the high it’s what you can do is use a limit order get a better price level thereby you are improving your risk to reward on the tree now the downside.

limit order for risk to reward

In this approach, sometimes the market may not come to the level that you’re looking at, especially if you set it at a very low level there’s a low probability of it actually coming to that level. You may not get filled and you might miss the move so this is kind of like a balance between where you think the market could possibly go to and then having a better risk to reward on the trade.

If you ask me where do you usually set a limit order, a rough guideline is this that you can see in the fifth picture. And If you want to put it near the market structure where the previous market structure is, in this case, you can see on the sixth picture where was the previous market structure.

limit order for risk to reward