Do you struggle with identifying the right forex market to trade?
In this video, we break down the reason to trade a particular market, the conditions that we need to see and how we enter.
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Watch the video to learn more…
The Conditions Of A Trade
The hardest part of trading for beginners is choosing a market to trade as there are so many to choose from.
The first idea of trading a market comes from a larger outlook. For instance, we could look for a fundamental reason behind why a particular currency could be strong. Alternatively, we can look at strength and weakness indicators to help us identify a trending market.
For our example here on NZD/JPY the strength meter we discussed in the forex week ahead analysis showed us that the New Zealand Dollar was getting stronger and the Japanese Yen was getting weaker.
This should highlight a potential uptrend on the NZD/JPY chart. Once we have identified why we should be in a currency pair then we need to identify the conditions of a trend, support and resistance, and then apply the strategy.
Identifying The Trend
If the conditions for an uptrend need to be met before we look for a trading opportunity then we need to see the daily or 4hr timeframe form higher highs and higher lows.
As we can see NZD/JPY did just that which we discussed in our previous video which can be seen here.
So, if we have the conditions met for an uptrend we can look for long opportunities if the price finds support at the previous swing highs.
The Entry
When a market is in a retracement phase on an uptrend we see a lower low and lower high formation until the price reaches the support level.
Once the support level is reached we can begin to look for reversal patterns such as a double bottom or an inverse head and shoulders pattern.
In this case, the market formed a double bottom pattern combined with the false breakout pattern providing a long opportunity.
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