Posted by forex at 6:38 AM
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1. Measure trend strength before you buy. Add the ADX indicator to your Forex price chart -- this indicator can be found in your chart indicator list. An ADX reading of 30 or higher indicates a strong price trend.
2.
Buy near strong price support. Support is the price level where demand is strongest. Using the drawing tool on your chart software, draw a line connecting recent price bottoms. This line represents price support.
3. Place a protective sell stop order below price support. A sell stop order is an order you place with your broker to sell at the price you indicate. This protects you from further loss if the price breaks through support.
4. Measure volume. When your trading system gives you a buy signal, did trading volume increase? Increased trading volume indicates broad investor participation in the price move. If volume is low, a whipsaw may be more likely to occur, so avoid taking the trade.
5. Check the news. Is the government meeting to decide on interest rates? Is there an election? Are there other potential market-moving events taking place? Whipsaws often occur in response to news events.
6. Use a wider stop order percentage. It is not possible to find the perfect price to buy. Give yourself some room for error by placing your protective stop order at least 3 percent below your buy price.