Often, risk in investment markets is defined in terms of cash. However, risk in a trading plan is not limited to just losing money. Another way to define risk is in terms of opportunity risks. Entering a particular trade means the trader may not be able to enter another.<!- mfunc feat_school ->
They say in the forex market, “Some of the best trades are the hardest to get into.” Therefore, it is crucial to identify trade entry points. Technical analysis is a fantastic way to identify these.
Use These Technical Levels to Determine Entry Points
- Daily highs and lows for medium- to longer -term positions
- Spike highs and lows
- Congestion Zones
- Trend lines in various time frames (daily, four-hour, and hourly)
- Fibonacci retracements of prior price movements (38.2 percent, 50 percent, 61.8 percent, and 76.4 percent)
- Hourly highs and lows for short-term intraday position entries
Be prepared with a backup entry point if the entry level sought is never reached. This may mean the position size needs to be reduced to make-up for the worse entry rate. If the plan involves a short-term trade, be sure the entry point is also likely to be reached in the short-term time frame. To do so, use momentum reading to help determine this likelihood.<!- mfunc search_btn -> <!- /mfunc search_btn ->
Just as important as determining the entry level is establishing the stop-loss level. The stop-loss level is the point where the trade setup stops and the strategy is negated. This level is set in order to minimize a trader’s loss. Occasionally, a trader is removed from a trade prematurely due to the stop-loss level. To avoid this yet still remain defensive, allow for a margin of error.