Using limit orders to get in the Forex market at a better price
In this video:
00:45 A 2% account gain for the week while trading on holiday/vacation in Queenstown
01:05 Support and Resistance levels
01:50 Draw these levels on your charts
02:51 Use limit orders to get your position filled at a better price
03:30 Increases your reward:risk ratio
Would you like some trading tips on how to best use limit orders in order to get into your Forextrades at a better price? If you would, listen up, got some great tips to share with you.
Hi Forex traders, this is Andrew Mitchem here, the Forex Trading Coach coming today from beautiful Queenstown in the south island of New Zealand.
As you can see behind me, it's just a stunning evening here, love this place. One of the best places in the world. It's just so great to be here and to be able to trading daily charts and on Monday, I took some weekly chart trades and in my evening, I'm looking at 6 hours and 12 hour charts.
A 2% account gain for the week while trading on holiday/vacation in Queenstown
That's it, probably no more than about 20 minutes of chart looking per day. Personally, so far this week, I'm up nearly 2%. I've got to be very happy with that.
On to today's subject. I had an email from Rafael. Rafael said, “Hey Andrew, can you talk about how to best use limit orders in order to get into the best price? Can you also talk about support and resistance levels.
Support and Resistance levels
And why the price quite often bounces at those levels and how we can take advantage of that?”
Support and resistance levels can be many things. They can be previous highs, previous lows. They can be round numbers such as 00s and 50s, such prices ending in 00 and 50. Look for those on the charts. You can draw those with horizontal lines quite easily on your charts. You would just be amazed how often the price does bounce at those levels, or come very close to a 00 level. It will come all the way down and it will bounce and go up again. No different to you going into a shop and buying something for $9.99, or $99, things like that. Its psychological bounce levels.
Forex traders, we take that into accounts so often and it's amazing how often the price does bounce at those levels.
Draw these levels on your charts
So, When you're looking at entering a trade, look at those levels, draw them on your chart. See where there's been previous swing highs and lows.
What you quite often find is, when you have support and resistance levels and don't get the support levels, or price below the current price, that means that this support means that if price goes down to that level. It could be supported at that level and it may well bounce back again.
However, if it breaks through that support level, it quite often goes and sticks the next support level, which would be the next major level below that whereas resistance is a level above the current price and price will quite often get to that level. It could store at that price. It could then retrace a bit. If it does break through that level, then it's quite likely to go up to the next resistance level, wherever that may be on your charts. It's really important that you have a good understanding of where to draw support and resistance levels.
I use an indicator which draws them on my charts automatically for me, and it just makes life so much easier. You can also just see those levels on your charts yourself and manually draw them on if you need to.
But, what I'm looking at doing is,
Use limit orders to get your position filled at a better price
if I'm taking a bi-trade, let's say. Rather than entering right directly into the market at the live price.
What I quite often do is take a buy-limit, so I'm looking at the price to retrace first and looking for it to bounce off of one of those support levels and then head back up into the direction that I'm looking for the market heading overall. Likewise, if I'm taking a sell trade, I won't jump into the market straight away at the cell price. I look for it to retrace back further and then look to get in at that retracement level and then look for the price to head down.
It draws support and resistance levels on your chart. It gets you into the market at a far better price,
Increases your reward:risk ratio
which then means that generally you'll find that your reward to risk, what you make out of the trade is at a far higher return then if you were just entering straight at the market. Of course, sometimes you may have to accept that you missed that because the price may not retrace far enough to get you into your predetermined level. That's just part of trading. You accept it at the price. If it doesn't retrace far enough, you just miss out on the trade and you don't get filled.
If you do get that refill and then the market turns around and then heads in your direction, what you find is you get some great returns from your trades.
I hope that helps. If you have questions like this, just send me an email at [email protected], and this time next week, I'll be bringing you a video from Adelaide in South Australia.
Look forward to talking to you then.