     |
There are Many Forex Setups -
|
Using proven Forex setups as trade entry conditions should be part of your Forex system. The likelihood of a successful outcome will be increased immensely.
Currency prices are generally driven by Fundamental factors. However, during the periods between major releases, Technical factors seem to have a greater impact on the market. Speculative traders will push for stops behind key support or resistance levels, causing waves in the main trend, which present opportunities for profit.
Experienced traders develop their own Forex setups, but they are most often derived from a few basic chart patterns. A good Forex signal is a must have tool in your trading kit.
The chart above shows the setup for a trade I put on this morning. The prevailing trend was down as shown by the resistance line on the left. The Tokyo traders had largely followed it, but once Europe came on line, they drove the price up about 100 pips while I slept.
As you see, the new uptrend ran out of gas as it hit a major resistance level and dropped through the new supporting trendline. These were the first bits of good news. Next, after taking a dip, the price tested the resistance line again, but couldn't break through and began to drop.
I put up a few extra technical indicators to get a feeling of the market sentiment and all 3 confirmed the price was at a peak and due for a drop. I think the trading gods are smiling on me!
Finally, the price dropped below the most recent swing low, which was my signal to jump in.
So, to recap... here are the components of this setup:- Price is moving against the major trend
- The rally runs out of steam at a major resistance level and drops through new short term trendline
- Price retests the resistance, but fails to break through
- Movement returns to major trend direction
- Price drops below most recent swing low
- Indicators point to likelihood of downward activity
There are actually a few setups here that can stand on their own. Click the links for a detailed description of each, plus a few others you should know...
Failed Retest
Forex 123 Setup
Exhaustion Spikes
Click here to return from this article on Forex Setups to the Home page.
