Welcome to this 1 lesson of Timing in Forex. Trading entries or Entry point — one of the most crucial aspects of successful forex trading. Knowing when to enter a forex trade can make a significant difference in your overall performance, as about 50% of a good trade depends on timing.
Entering the market too early can expose you to false breakouts, where the price appears to move in your favor but then reverses, trapping traders. Entering too late means you might miss most of the profit potential, as the market could have already moved significantly.
Regardless of whether you trade on a 1-minute chart or a daily chart, the most reliable price is the one at which the session closes. Many false breakouts occur because traders enter before the price confirms the move with a close beyond support or resistance levels.
For example, if the price initially breaks above a strong resistance but closes below it, this is a classic false breakout. Jumping in too early often leads to losses.
How to Decide Your Entry Point Forex Traders Use
To improve your trade entry, first assess the risk-to-reward ratio. Identify where you’ll place your stop loss and locate the next resistance or support level. Measure the number of pips between your entry price and these points.
If the ratio is 1:2 or better, it’s generally safe to enter the market. If not, it’s better to wait for a more favorable setup.
Avoid Overtrading and Emotional Decisions
It’s natural to feel regret after missing a big move and to want to jump in regardless of conditions. However, statistics show active traders often underperform investors by about 10% annually because of overtrading.
Being patient and sitting out bad trades is also a position. There will always be another setup for the best entry point.
Example of Smart Entry Timing
After a strong price move upward, it might not be wise to enter immediately due to a poor risk-to-reward ratio. However, when the price pulls back and creates a new higher low, reevaluate the ratio. If conditions improve, enter the trade following the old trading wisdom: buy low, sell high.
Summary
Mastering trading entries and knowing the best entry point forex trading can increase your success significantly. Always wait for confirmation via the close price and maintain a favorable risk-to-reward ratio before entering. Remember, patient traders win more often.Use these timing strategies with the tools and guidance from PROP365 to enhance your forex trading results.
