I intend to trade FX part time and would like to know more about where to place buy/sell limit orders. You can find a lot about how to place them but not where to place them as a result of chart analysis.
For example trading in the range a lot of textbooks, etc talks about placing your order when market reverses with a conformation on a candle such as a pin bar, hammer,etc. But if I am to place a limit order (buy or sell) the candle hasn’t materialized yet because the order is pre-determined so how am I supposed to seek that confirming candle? Should I refer to previous highs/lows and look for such a candle there?
Maybe anybody knows some material (textbooks or articles) that address the subject or maybe I just stupidly missing something?
A bullish reversal from a downtrend to an uptrend can be signalled by the pin bar or hammer etc. but the validity of the signal bar is only confirmed when price moves above the signal bar’s range; some would say only when the next bar closes above the signal bar’s range.
Its always nice to put a buy order above where price is currently as this confirms upward momentum: although this surrenders some of the potential gain as opposed to entering at the close of the signal bar, the distance from the close to the high should not be excessive with these candlesticks. Waiting for another bar to complete surrenders more pips but usually gives a higher probability of success.
Thank your for your insightful reply!
what I gather is that I have to wait for such a candle (hammer ,etc) and place my limit order where a confirmation candle would close ?
So even if I am to place a limit order I still have to wait for the confirmation candle to place my order then, but Forex is 24th so it easy to miss a trade ( I am talking about a daily chart mostly)
Limit orders can be tricky, my best advice would be to practice your strategy manually a lot with market orders once you see them hit often then move to limit orders. You have to know your strategy completely before letting your broker enter for you numerous times
You obviously need the signal bar - the bullish pin bar or hammer - to close. But if you want to be aggressive and get the earliest possible entry the next day you don’t need to wait for another close, just set a buy order anywhere above the signal bar’s high. The lower you set your buy order, the more pips you will make if your order is triggered but the more likely your order will be triggered by a false move upwards which fails before making much of a gain.
As I work full time I won’t be able always to execute market orders. I was gonna do swing trading therefore. So limit or stop orders are my only options? (or maybe not?) I find this part most difficult in trading while keeping my full time job. The part where you dont miss trades
For a long time now I have rarely opened trades off the daily charts live, I almost always enter and usually exit using pre-set orders. As long as you can set orders at or soon after the close, its not a really big issue.
Typically I will set a buy order above the high of the signal bar, whether that is a reversal bar like a hammer or a bar with a lower high and lower low in a pull-back within an uptrend or an inside bar within a range. The idea is that if price really is going to rise it has to do so with enough momentum to do better than in the previous day and reach my entry point - its not wrong to set a buy order 1 pip above the high or 20 pips above the high - both have pros and cons.
The stop-loss position is typically not far below the low of the signal bar.
That’s right, this is what I learned and it makes perfect sense. I am based in the UK and would like to trade on the daily chart, a daily candle closes at 10.pm, does it mean that I always have to wait to place my order after 10. pm when the confirmation candle is completed?.
the thing is that if the confirmation candle is not complete it can turn not to be what I don’t want it to be
Sorry for asking a lot but I find an entry on part-time bases the most difficult part so far
Strictly speaking yes, you should wait for 10pm. However, I check the charts also at about 5:30pm, when most of London’s business is winding down. To be honest, its rare for a daily candlestick to change much from what it was at 1730 - sure, price slips up and down a few pips, but a hammer at tea-time is usually still a hammer at bed-time. Easy to check with a print-off or screen-shot of the charts.
I remember an old hand being asked which is best - his answer was short - if you place a buy below current price then price has to go against your direction when you enter.
I would not trade with limit orders. Not in a way that you set up some limit orders in the morning before you go to work and then see what happened when you come from work. I think it’s impossible to be profitable like that. The better part time trading strategy is active trading for 2-3 hours after your main job. The markets will be slower, but there might be some “meat left on the bone”. But you must consider that you will be tired after day of work (meaning less impulse control) and many other psychological factors might be in play, plus if you don’t have a profitable strategy, it’s almost guaranteed you will lose money. So my recomendation would be to learn a profitable trading system and trade full time during the day. Or then swing trading. Check out my course theintelligenttrader dot com if you want to learn such trading system.
You are 100% wrong if you think that pre-setting entry orders on a daily chart cannot be profitable.
I personally almost never trade intra-day but I think that’s a failing on my part, I’m sure it can be done but I just haven’t found the right way yet. How are you making money daytrading?
I sometimes trade with limit orders intraday, but only when I see what the market is doing and I expect the price to bounce from some level. I would never place limit orders for the day. I just have to watch the market. I don’t have stomach for being away from the market and leaving some limit orders. Feels like gambling to me with a surprise after I come to check the market.
Hey there! Well I strongly believe that limit orders do make for excellent tools, but there’s also no denying the fact that they aren’t perfect. Since limit orders can be executed way too soon, you can easily lose out on the additional gains or shares. To be on the safer side, I would suggest you to buy/sell a stock and set a limit order that’s safe from the daily price fluctuations. Do make sure to set a limit price at a point where you would be satisfied with the result.
Based on my personal experience, I can say that the stop-limit order can be tricky and you might not always understand it because it contains parts of two order types i.e. the stop order and the limit order.