Market Timing - the Golden Rule of Entering Trades for Big Profits
If you are entering ANY Trade and want to maximize profits you need to obey the golden rule of timing your trade entry correctly.
Most traders ignore this rule and time their entries incorrectly and lose. So what is the golden rule of market timing?
Let's Find Out.
The Golden rule is:
Trade On Confirmation and don't predict!
Many traders like to predict where prices are going to go with no confirmation from price action and impose their view or emotions on the market.
Let's look at some examples.
1. Buying Into Support
A trader sees prices move to support and buys.
They simply hope support will hold however, there is no room for hope in the market.
If the trend is down assume prices will continue.
You need to wait for support to hold and price momentum to reverse this confirms the move.
The best way is to use a momentum indicator and the best one is the stochastic. Wait for price momentum to turn up on the stochastic and then go long.
The same logic applies to selling into resistance.
2. Buying a breakout
Buying breakouts from new highs is one of the most effective ways of catching the big trends and the majority start from new market highs NOT new market lows.
Most traders however psychologically cannot buy a new market high and miss the move
Why?
They actually choose to ignore the confirmation of a new trend and want to buy at a lower price i.e they want to buy the pullback!
Fact is however that most major breakouts don't pull back - they continue and the trader never gets on board.
If a breakout occurs the market is confirming the trade to you so take it.
Waiting for the price to pullback is one of the most common errors in forex trading.
Of course, we all want to "buy low and sell high" but the real pros know to make money you need to:
"Buy high and sell higher"
Market timing means acting on confirmation.
In both the above examples you can't buy low - You miss part of the move but this is the only way to trade to make money.
When a move confirms you trade.
People get obsessed with buying the lows. or waiting for the lows to be re visited and that's why they don't win.
Learn to trade on confirmation and use the best timing tool of all the stochastic indicator, which gives you short term price momentum.
Related Tags: forex trading, market timing, trend following, breakouts, online currenxcy trading
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