The Forex market is traded based on major three types of analysis. All the professional traders have developed strong understanding in the three major sectors of Forex to find the best quality trading signals. These three types of analysis are
- Technical analysis
- Fundamental analysis
- Sentiment analysis
We all know what these three forms of analysis help you to achieve. Most of the retail traders execute their trade based on technical analysis. Some even ignore the fundamental analysis and lose money. Always remember that if you have any lacking in these three major parts then you will have to suffer hard in your trading career. In your today’s article, we will discuss how to use the advanced technical analysis to execute our trade with a high level of precision.
Use of lower time frame: Most of the time the technical traders only use the one single time frame and that is the higher timeframe. Though the higher time frame data will give you high-quality trading signals you will also have to use wide stop loss for your trade execution. But if you use the higher time frame signal and execute your orders in the lower time frame then you can easily use a tight stop loss to your trade. It might be sound little confusion but let us give an example. Let’s say have spotted a bullish price action confirmation signal in the daily time frame of GBPUSD pair. So instead of placing your trade at that very moment, you should wait until the price hits the minor support level of the market. You can also set the pending orders at the minor levels in the lower time. By simply following this step you can even reduce your stop loss even more than 50+ pips. Always remember that the expert always looks for precise trade entry. So do some hard work and find a way to reduce your risk exposure.
Use of dynamic support and resistance level: Almost every successful traders use dynamic support and resistance level to trade the market. They simply install the 100 days SMA in their trading platform to find the dynamic trading levels. If you look for more precise entry then you can also use the 200 days SMA. Some traders often set pending orders at the dynamic levels of the market which is very risky. In order to ensure high-quality trade execution, it’s better for you to wait for price action confirmation signal near the 100 or 200 days SMA. Once you find the reliable candlestick pattern assess your risk tolerance level and execute your trade. This system is extremely profitable but make sure that you are never trading the trend reversal of the market by using this system. As long as you trade in favor of the market trend you will always have high chance to win a trade.
Harmonic pattern trading: Harmonic pattern trading is one the difficult part of the technical analysis section. However, due to the recent advancement in technology, many Aussie expert traders are now using harmonic pattern indicator to find the best reliable pattern in the higher time frame. But some traders in Australia still draw this pattern in the world traditional way. But this system also requires the use of tight stop loss. So how do we minimize our risk by using a tight stop loss? This is when the concept of price action trading strategy comes very useful. After the pattern is successfully identified in the higher time frame you should wait for price action confirmation signal to trade in favor of the market trend. If you want to trade the trend reversal then you need to assess the fundamental factors. A strong fundamental data relapse can easily change the long-term trend of a certain asset. But while you trade the market with this system make sure that you are not risking more than the amount that you can afford to lose.