Let us say that there is an overall downtrend in a pair but it keeps forming lower lows and lower highs with lots of retracement… And right now, the pair is bullish and once it hits the resistance it is going to race back down, based on what happens in the past… I understand that I can set a sell limit on the resistance (expecting that price will go down after that) , so that the order will be triggered at that point…
But why should I do that? I can directly enter the market and put a wider stop loss beyond that resistance right? After a place a sell order, the pair might still go up until it hits the resistance and then come down again as the overall trend is down… What is more normal here? As I am a newbie, i am trying to understand what the pro traders usually do… Is opening a sell limit order is better or can I enter the market right away and put a wider stop loss.
Look at this image… I tried to find out support and resistance and drew red lines. I also drew two trendlines as well in green. I am very new to technical analysis and I am not even sure if I am making the right predictions… What do you think about the image? It is USD/JPY one hour chart…I really want to know if I have plotted support and resistance and trend lines correctly…
You’ve kind of answered your own question. By entering short now (say 115.90), you have more at risk if you end up wrong. If your resistance is at say 1.1620, and your stop at is 1.1640, then if you enter now, you are risking 50 pips if you’re wrong. If you instead enter on the limit order at 1.1620, then you are only risking 20 pips. Of course, price may never reach 1.1620 and instead drop straight away, but I believe this answers your question.
Thank you, Yeah I understand now… I also want to get some feedback on the chart I posted. Do you think it was a right decision to go short? Is the trend line drawn correctly etc…
Sometime I am also using sell limit on certain area and put stop loss on certain point, and sometime also trying to using averaging sell if I put sell limit and also still put stop loss on same point or different only few pips distance, but sometime success and sometime fail too depending with the market
Near enough, anyway. For myself, I typically put more faith in horizontal ones denoting areas of recent support and resistance than in diagnonal ones, but yours look pretty accurate to me, from what I can see.
I always draw them along the ends of the wicks rather than the bodies of candles, because highs and lows are objective and factual, whereas opens and closes are subjective and user-defined.
Thank heavens for your customarily profound insight, Bearish: I was getting into a state of anxiety, here, for a while, through fear that this thread might for ever lack the inestimable benefit of your ubiquitous wisdom.
You can use pending orders as sell limit, buy limit etc. if you want to open an order on a specific price level. Elsewhere, you can monitor the instrument and just place the order when you feel that is the time. Pending orders are also helpful when the volatility is high and you want to place specific stop loss and take profit.
If we refer to some basic conclusions from probability theory, according to Central Limit Theorem when the number of factors affecting of outcome of something goes to infinity (and all factors are roughly equal in impact), the outcome converges to its math. expectation.[U] In forex terms it means that price at any moment has a 50/50 chance to go up or down. [/U] The point of telling is to show that using technical analysis alone without realizing real trading intentions is playing negative odds game. Try to use technical analysis in combination with fundamental data, like important economic data or “talking heads” because it is what the crowd bet on.
Good luck
