Forex entry strategies

A forex entry strategy is a plan on how and when to open a position in order to make the maximum profits while avoiding risks to its barest minimum. Imagine being able to enter the market at a point so low that may never be recorded again (anytime soon). At this point, the price of the currency pair will only move up. It may come down, but not anywhere below the point where you entered the trade. That is a good entry point. How can a trader come up with an entry strategy that can produce the best results?

HOW TO DEVELOP A STANDARD FOREX ENTRY STRATEGY

Standard in this context connotes a strategy that can identify the market turning point in advance, point it out to the trader, who trades accordingly to achieve success. The key to such a strategy is market timing. Asides from the basic things that should be considered in developing a forex entry strategy, the following points should be put into consideration

-    Risk factor

-    Profit margin

-    High probability

All these will help a trader to develop a forex entry strategy that can be really helpful in making profitable trade decisions.

-    RISK FACTOR:

When a trader enters the market at a point that is close to the turn in price, which is very close to the protective stop, it allows for maximum position size while exposed to very little risk. This implies that the further a trader enters the market away from the turn in price, the more the need to reduce position size in order to keep risks in line. Generally, the trader will have to keep in mind this risk factor.

-    PROFIT MARGIN:

The closer an entry position is to the turn in price, the greater the profit margin. This works the same way like the risk factor. The further a trader enters the market at a point that is away from the turn in price, the more the profit margin is reduced. So once the trader is able to structure his or her entry strategy based on the risk factor as explained above, then the profit margin issue is taken care of.

-    HIGH PROBABILITY:

Another thing that traders need to put into consideration when developing their entry strategy is how the banks are trading. This is pretty much all there is about proper timing which results to good profits. If a trader buys a commodity at a time when the major buy orders are in the market, there is a high probability that it will turn into major profits.

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.

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