Strategies to Avoid Mistakes in Trading Entry
Mistakes in entrying trading are one of the main causes of loss that many traders fear. In addition to presenting loss as a negative impact, incorrectly choosing a forex trading entry position can cause adverse psychological effects, and if not careful, can lead to overtrading.
Just imagine, traders have struggled to identify trends and try to catch the best opportunities possible. When you enter a trade, the trend reverses and erodes the trader's funds. Other times, traders have been careful not to simply interpret trend forwarding. By planning an open trade in the opposite direction of the current trend, traders hope to recognize price reversals and profit from forex trading at the start of the trend. But once again, traders are fooled after trading entry, because the reversal signal that previously appeared was just a correction. The price actually then returned to its original trend, and the trader's funds sank again into losses.
In the language of ordinary traders, wrong entry trading is a situation where "open buy prices go down, sell has followed but prices have actually increased". In order not to get caught in a similar situation, traders are encouraged to ensure the accuracy of forex trading entries before acting. Well, the following 3 tips will reveal ways that can be done:
1. Perform Entry Trading Analysis at the Closing Session
The forex market is active 24 hours a day during the working day. However, that does not mean that there are no specific recommendations about the best time for trading entry analysis. Although traders are not required to follow a certain schedule, so that the accuracy of trading entry is maintained, it is better to do an analysis after the New York market close. Why should it be like that?
At this time, the market has just ended the New York session and is turning to Sydney. Trading volume in this session is very low, so traders will not encounter a lot of noise on the chart. This will obviously make it easier for traders to observe support, resistance, signals, or daily trends. For the record, we recommend using the daily time frame (D1) to maximize the function of this trading entry analysis.
2. Before Trading Entry, Align "TLS"
Directly related to trading entry confirmation, these tips mention "TLS" (Trend, Level, Signal) as components that must support each other as a condition for open trade. For example, when a trader relies on price action signals for forex trading entry, then pay attention to how the trend and support resistance levels are.
A bullish pin bar formation (buy signal) bouncing from a key level. Because that level is a tested support that is being turned into resistance, the pin bar buy signal is considered confirmed. Along with these conditions, the price trend seems to be strengthening (up). Well, conditions like this show the alignment between Trends, Levels, and Signals.
As for the sell entry trading, you should also pay attention to how well the Trend, Level, and Signal match. If the signal has sent a sell alarm but the trend and level do not support it, then you should not enter a trade first because the accuracy of such an open trade is very doubtful.
3. Take advantage of pending orders
The pending order feature provides immeasurable convenience for those who really want to avoid forex trading entry errors. Basically, pending orders allow the trader to specify an entry level that will only be executed in the future. Thus, a new open trade will actually take place when the price touches the level that the trader has targeted.
There are 2 types of pending orders that are most commonly used to help traders avoid trading entry errors, namely limit and stop.
Application of Limit Order
Limit orders are suitable for users of reversal strategies, because they basically facilitate traders to enter buy trades below the current price, or plan sell levels above the current price.
In this case, the target level set in the buy or sell limit order can be adjusted to the key level that is the catalyst for the price reversal. Of course, analysis is needed first to get such a key level.
Support resistance, pivot levels, or psychological limits are examples of levels that are usually observed as catalysts. Let's say EUR/USD is currently slumping and is approaching the key 1.1210 support. Since market predictions suggest the pair will turn bullish, traders can anticipate buying opportunities by placing a buy limit at 1.1210.
Application of Stop Order
Stop orders are most useful for traders who like to "surf with the trend". Buy stop orders actually allow traders to enter trades, only when the price has touched a higher level than the current price. Meanwhile, a sell stop will only activate an open sell trade when the price has touched a lower level than the current price.
In this case, the target level of the stop order is the one that is expected to confirm the trend continuation. For example, when EUR/USD strengthens and has the potential to break the resistance at 1.1250, you can set 1.1250 as the target level in a buy stop order. That way, you don't have to worry if the price fails to strengthen to 11250 and then it declines, because none of the orders were executed and it caused a floating minus on your account.
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