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Are You a Short Term Forex Trader? Optimize Your Entry Points

June 01, 2018
BY Emma Richards

If you are a short-term trader, you should know that the “noisy” components of price action can have serious impact on your trades. The choppier the price action, the more accurately you should enter to gain an edge over the market.

Plan The Beginning Of Your Trade Carefully, Not Just The Exit

Why is entry important? After all, at first glance the point of exit would seem to be the most important thing to consider. While this is true, a decent trade location for stop loss is also essential and should be placed beyond a reasonable level instead of a random point on the chart.

How, then, should one optimize entry points? There are several ways to do it, but I prefer the following methods:

Fractal Method

There is no need to jump right into the market during trading setup (whatever it may be). Smart traders spend time figuring out the size of average intraday rotation before entering the market. Additionally, one should also consider the option of entering after a pullback.


ATR Method

Before entering a trade, take a look at the clock. What time is it? Recall that volatility may increase during the European and US session openings, so it is advisable to not rely on current volatility (which can be low). Instead, try to capture possible “noise” that may appear soon after. 

Additionally, as a good practice, consider the placement of stop loss order to limit losses.

In the graph below, we built a buffer zone close to the entry point by multiplying the ATR by two and adding it to the entry price. Entry order was placed in the center of the zone.


Top Tip: Entry Is Important

Optimize entry points by measuring the average volatility of intraday price action with the fractal or ATR methods. Observe and analyze the results.

RELATED: What Is The Best Time Of Day To Trade Forex?

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