Which Market Entry Strategies Are The Best For Forex Trading?

The forex market surely offers a lot of profitable opportunities for trading, but the result you get at the end of a trade depends on your starting point. How well you enter a trade will decide the end result you get with it. Hence, making the perfect entry is essential for getting the desired results at the end of the trading process. The topic we are about to discuss today is the strategies that you can use to enter the forex market at the best price and at the best time. Which market entry strategies are the best for forex trading, and which one would be perfect for your trading system? Keep reading till the end to find some valuable insights.  

• Entering the market when it is trending 

One popular market entry strategy many forex traders follow for a perfect trade is trend trading. If the currency pair you have chosen to trade with showcases a strong trend, then you can use it as an entry point for your trade. The forex market is known for its constant price fluctuations, and if the prices are moving in a certain direction for a specified period of time, then we can say that the market is trending. If the prices are rising or if there is bullish sentiment for a pair, it is referred to as an uptrend. On the other hand, if the prices are falling with a bearish sentiment for the pair, it is referred to as a downtrend. 

Both uptrends and downtrends provide different types of opportunities for trading. When you see a bullish trend, it will be a perfect opportunity to go long on the pair, whereas a bearish trend is suitable for opening a short position for the pair. In technical analysis, traders often make use of trendlines to find the ideal entry prices for their trends. A trendline is drawn by connecting the highs and lows of price movements for the timeframe that you have chosen for trading. 

A valid trend line will be connecting at least 3 highs or lows without many zigzag movements interrupting the trend. As the instrument breaks the trendline, traders can take long or short positions. As for the position size, traders should risk 2-3% of their total capital in a trade. They can calculate the position size and other values on their respective trading tools, which are available for free with many brokers. 

The best method for utilising trends for market entry is analysing the price movements in a higher timeframe first. Looking at a higher timeframe will give you a clearer picture of the ongoing trend or market direction. Then, you can start looking at lower timeframes and see if they are similar.  If both higher timeframe charts and lower timeframe charts suggest a strong trend in the same direction, you can enter the trade at the point when the price patterns of these two timeframes come together. 

• Using Price channels 

One thing you need to remember while trading forex is that the market will not be trending all the time. There are times when there are only sideway movements or choppiness, especially when the currency pairs are going through a phase of consolidation. In this case, the prices are stuck within a range with only zigzag movements displayed on the chart. In this case, you can make use of price channels to find the optimal entry point for your trades. Price channels have two key levels to consider: support and resistance. 

Support is the lowest a pair price can drop to before it starts rebounding, and resistance is the peak point, after which the price will start falling with a retracement. The simplest strategy a trader can follow while relying on price channels for analysis is buying at support levels and selling at resistance levels. Whenever you see the key support or resistance levels being breached, you can consider entering the market as there will be an opportunity with good profit potential as a shift is happening in the prevailing trend. 

Regarding trend trading, traders have a directional bias, but you can never be sure about the direction when it comes to range trading. However, you will be looking forward to the prices coming back to where they were before. Trend traders will be trying to make the most out of a trade by entering the market early, while range traders just want to catch quick pip movements with smaller trade sizes and doing it several times allows them to hit their daily targets in a range-bound market. 

After capturing quick pip movements multiple times in a trading day, you can quickly count the exact profit you’ve made with the help of a pip calculator. This tool lets you calculate the pips earned in your account's base currency to help you know exactly how much you’ve made. 

• Waiting for Trend Reversal 

Another strategy many traders use to enter the currency market at the perfect time is waiting for a trend reversal. This allows you to join a trend at the best price, increasing your profit potential. The theory behind entering a trade before a potential reversal is that the market will always have a price reversal once a trend reaches its peak point. When there is a prolonged uptrend, the market will naturally become overbought, and there will be no buyers at a point. Then, the market will correct itself by switching to a downtrend with a reversal. 

This will be an ideal entry point for traders as they get to join a budding trend. Those well-versed in technical analysis will be able to find potential reversals by looking at the price action and for relevant reversal patterns. The head and shoulders pattern is one of the most prominent reversal patterns, along with double top/double bottom patterns. Triple top/bottom patterns also suggest potential reversals, and you can also refer to the wedges or divergence on the chart to spot possible reversals before they happen. 

• Keeping an eye on News releases and key economic events 

Another strategy you can follow for entering the market at the best time is keeping an eye on news releases and key economic events relevant to the pair you are trading with. This technique is mostly used by traders who rely on fundamental analysis or follow news trading strategies. But even technical analysts need to make use of the economic calendar as the currency prices will always be impacted by major news and events such as central bank meetings stating interest rate policy changes, inflation data releases or other relevant economic events with the power to influence the exchange rates. You should never ignore the news when you are into forex trading, as a single news can invalidate your whole analysis. 

However, using the news to find an entry point requires some fundamental knowledge, as you need to be aware of the news's impact on the pair you are trading with. Beginners often find it hard to make assumptions based on the news, while seasoned traders can assess the situation more clearly using their past experience. But you can still find many online platforms sharing forex news and its possible impact on helping traders make informed decisions. In any case, you must keep track of the news events as the market can become extremely volatile after a news release.  

• Relying on Technical indicators 

Whether you want to follow a trend, wait for a reversal or enter a range-bound market, finding the best entry point will be easier when you have some reliable indicators added to your chart. So, let’s look at 3 of the most commonly used technical indicators you can use to decide the entry point for your trades. 

• Moving Averages - Moving Averages are one of the most simple yet powerful indicators used by forex traders. It is simply a curve line that gives you an insight into the ongoing trend. If you see the prices moving below the MA, the market is bearish with a downtrend, and if it moves above the moving average, there is an uptrend with bullish sentiments. You can also identify potential reversals by looking for a point where the price is crossing the MA curve. 
• RSI - RSI, or Relative Strength Index, is another simple yet useful indicator that can be a valuable addition to your charts. RSI is about an asset or trading instrument being overbought or oversold, which is currency pairs in the context of forex trading. The market is overbought and oversold, hints at a potential reversal for correction, and you can use it to find the best entry points for your trades. 
• Bollinger Bands - Bollinger bands are an advanced indicator which combines 3 moving averages, making it more precise. Bollinger bands are used for determining market direction and the type of position that needs to be opened to make the most out of a market situation. 

Conclusion 

So, these are the best market entry strategies that you can consider as a forex trader. But besides finding the perfect entry point, you should also make use of relevant tools for risk management and planning your exit point. Closing your trade at the right time and price is just as important for implementing your strategy perfectly.