Any trader who has basic knowledge about the Forex market knows that the most important thing here is to define market entry and exit points correctly.
Trading in the currency market can be risky as you come "face to face" with the market. Consequently, you mast have a clear instruction how to act to be able to count on success.
Trading by use of strong price levels is a special trading system that allows a trader to find the best entry points and make the best decision once the price has reached a certain price level. So, let's begin.
First, let's try finding an entry point on the chart.
An entry point is the minimum value of the price change range. Thus, it's a price trough and a price peak, if we deal with an upward and downward movement, respectively. This understanding of entry and exit points contributes to higher profits and minimizes your losses. The borders of our price range will always coincide with powerful support and resistance levels. Here, we should mention that these levels may be broken out by the price. That's why entry and exit points must be located a bit further from the edge of the borders.
Stop Loss is easy to compute here: it's the level located right after a powerful support or resistance level so that it won't be broken out by a price movement.
Once you have defined these 3 points, you only have to compute possible risks. That's quite easy to do: the minimal profit-loss ratio should be 3 to 1. Two-to-one and one-to-one ratios would be quite risky under this strategy.
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The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.