How To Execute A Trade
How To Execute A Trade (Accurately)
Pay close attention to this topic, forex trader.
This is an art that has been lost in translation thanks to internet marketers / self-proclaimed gurus etc.
The most commonly taught method by far in forex trading for beginners is the instant execution.
This is where you open a trade as soon as the signal has been given, also known as instant execution.
This allows the trader to get in the market as soon as the signal has been identified, but the key issue here is that the candlestick pattern has yet to fully form.
This is one of the biggest mistakes’ beginners make.
You may get a signal, but you must ensure the signal is valid.
By entering trades at instant execution of a signal would lead to more losses.
At the absolute minimum, you must wait for the candlestick to close and confirm the signal before entering a trade.
Trading after a signal on an open candlestick is risky.
We know what you are thinking, aren’t all candlesticks open?
As true as that may be; we are talking about trading on the signal candlestick.
For example, if the candlestick looks like it is forming a pattern – you must wait for the candlestick to close to confirm and validate that pattern.
Alternatively, you can use the real way of executing a trade – that increases the chance of your signals being valid.
To make sure you always get the optimal entry level with every trade you take, place your order 1 pip higher than the previous candlesticks high if you want to buy – or 1 pip below the low if you want to sell.
By doing this, you will decrease the potential pips on a drawdown at entry too.
Let’s show you an example.
Here is an example of when to buy at the optimal level:
In this example, as you can see our signal is the green bar that appeared straight after the red after a sharp move down.
We look to take advantage of this reversal and place an order 1 pip above the high.
This allows us enough room to avoid any false signals but it also confirms the market’s intention of going higher as they have broken the previous high (which was a signal). This adds validity to our order.
Below is an example of how we would enter a bearish opportunity:
In addition to the obvious, this will help protect your trades from potential fake signals.
One of the main arguments is that you miss out on pips if the signal has triggered and you wait.
That is very true, but what is more important?
- Being early in the trade with a higher chance of an invalid signal or;
- Waiting for an optimal trade level to enter the markets with a valid market sentiment behind it.
Can you start to see why we chose these entry points?
Over time this could certainly defend you against poor forex trading opportunities and it will certainly train your mind to review the information in front of you – instead of basing it on emotions.
A quick recap to optimal trading entry levels
Buy: Place order/execute trade 1 pip above previous candlestick’s high
Sell: Place order/execute trade 1 pip below previous candlestick’s low
It’s as simple as that.
Here is a candlestick pattern cheat sheet of all the best ones to look out for.
Just this little top trading tip alone could help improve your trading and avoid weaker signals.
This is not a replacement for your trading strategy, but for your rules to execute the trade with even more accuracy.
So now you know how to execute a trade in forex, accurately.
Easy enough, right?