Trendline Forex Entry Signal - Two High Probability Setups

A reliable Forex entry signal usually involves a combination of factors which all come together at the same time.

No single indicator can provide the ideal entry level and the new Forex trader has to grapple with this stark reality. Many find this hard to accept and spend countless weeks and months and hard earned cash in search of what could be termed the 'holy grail.'

Learning to trade the Forex is hard work and needs to be treated like a business, the same as any other business. It requires a large investment of time, energy, mental discipline, and a cautious investment of cash until the necessary skills are acquired.

Trendlines are just one of the tools seasoned traders use along with other indicators to provide a reliable Forex entry signal.

Here we spell out two distinct ways in which trendlines can be used safely. Using a higher time frame candlestick chart such as a 60 minute, 4 hour, or even daily chart, a trendline is drawn along the most significant lows in an uptrend or across the most significant highs in a downtrend.

1. Momentum Combo

As price moves upward in an uptrend or downward in a downtrend, it will retrace and bounce off the trendline at certain times. However, using a trendline bounce by itself as a Forex entry signal is too risky. There have to be other factors.

Once you have drawn the trendline you now have a graphical representation of price movement and you will be able to see where price has to retrace to test the trendline once again.

Now use other indicators to see if that level where price would need to retrace to test the trendline combines with other factors.

Calculate your daily pivot points and draw horizontal lines on your chart to mark them.

Run your eyes left on the chart and note if there were any significant highs or lows that formed support or resistance within the last few days. Support and resistance on higher time frames usually provide more substantial reference points.

Use the Fibonacci tool on your charting software and mark retracement and/or extension levels on a variety of swing highs and lows and see if any intersect the trendline.

Also make sure you have the 200 EMA (Exponential Moving Average) line shown on your charts and note whether this also intersects near or at the trendline.

Now if you have a combination of two or three of the above indicators meeting at the same place you have now identified a Forex entry signal that can be regarded as high probability.

Put in your entry order to be take in long at this point where the trendline intersects with the other indicators and set a reasonable target limit for what probably will be a profitable trade.

For a downtrend, simply use the above indicators going the other way.

2. Break Combo

The second way to identify a reliable Forex entry signal using trendlines is to watch for a break of a trendline on a higher time frame such as the 60 minute, 4 hour, or daily chart.

Some traders sent an entry order to go long or short once price has broken the trendline by a few pips. That works for some.

There is however a safer way to trade a trendline break.

It will be observed that often (not always, nothing is absolutely certain when trading the Forex) once price has broken a trendline and moved 15-30 pips, it will come back, retrace, and test the backside of that trendline.

This is where again you use the combination of factors mentioned in the previous strategy.

Look to see if the point at which price may come back to test the backside of the trendline coincides or combines with factors such as:

* Pivot points

* Previous swing highs or lows marking support and resistance

* Fibonacci retracement or extension levels

* 200 EMA

Now when you place an entry order to be taken in at that level you are doing so on the basis of a clearly defined Forex entry signal.

For a graphical example of the above, see the resource box below.

Be aware that trading trendline signals on lower time frames such as 30 minute, 15 minute, or even 5 minute charts are very high risk trades. Price will break these short term time frames frequently during the course of a day and catch a new trader frequently by luring them into a trade they later regret.

Be patient and wait for things to setup as described in the two methods above for high probability trades triggered by a combination Forex entry signal.

For an actual trading example using the trendline strategy above click here:

http://www.vitalstop.com/Forex/trendline.html

Click here to learn how to use another indicator, the 200 EMA, in a simple yet powerful way:

http://www.vitalstop.com/Forex/Advisor/200EMA-forex-strategy.htm

For the best free economic calendars plus a free pivot point calculator and Fibonacci calculator click here:

http://www.vitalstop.com/Forex/tools.html

Article Source: http://EzineArticles.com/?expert=Michael_A._Jones

Forex Demo With Fibo Calculator

Wagering huge volumes of money in a market as susceptible to change is liable to cause a whole range of opposing emotions; fear, excitement and anxiety just to name a few. Battling against your emotions in order to complete a successful deal is one of the major hurdles, which must be overcome if you are to become a trader able to close huge deals and earn vast sums of money. If you can overcome or even use these emotions to make trades on the Forex then a successful career may be beckoning, but failure to do so will almost certainly cost you a substantial amount of money and end any lingering desires to progress in the busy world of exchange rate trading.

Initiating and closing a trade at the right times are the backbone of becoming a successful Forex trader. If a person cannot execute these deals at the right times, the psychological and financial damage can be crippling. Missing a huge trend or sitting too long on a good price, can be a demoralising experience, but one that many will encounter during a career in Forex trading.

Entering at the right time is just one thing that must be done correctly, but if you are unable to leave at the right time or hold your nerve during the course of the trade, the implications are potentially severe. For example accepting a small loss just before the market rises can lead to a horrendous huge profit/loss ratio margin. Similarly sitting on a currency price that is plummeting for too long could be financially crippling. Understanding the Forex market and having faith in your ability to judge a trend will pay dividends if you hold your nerve, backing out at the wrong time can prove to be a catastrophic misnomer.

Forex Demo - 2

consider when you are creating your Forex Trading System. Choose aspects of the different systems that are out there that fit your trading style best, and then build your Forex trading system.

An excellent trading method, which was made famous by Richard Dennis and William Eckhardt and is sometimes referred to as Turtle Trading, is one of the best Forex trading systems that I know of. They get returns in excess of 20 to 100% per year using this system. But, could most traders trade their system? Not a chance! Dennis and Eckhardt also loose on over 60% of their trades.

Once you know what sort of Forex Trading System will work best for you, look at the components that make it work. Face it; if you are a new, or even a fairly serious, trader how likely are you to come up with a totally new concept? There are some very smart and wealthy traders out there. Why not use their ideas. Consider Dennis and Eckhardt’s turtle trading, their system is based on a “breakout” method. I know most traders could not trade using their exact method, but they could take parts of it, such as the breakouts, to confirm a trend.

You can also use other Forex trading systems to give you an outline of what parts a system has to have for it to make money. All great Forex trading systems have these three basics:

1. Entry Rules,
2. Money Management Rules and
3. Exit Rules.

Study and learn from the Forex trading systems out there, borrow their concepts, and steal their ideas. It will put you on the track to the system that will make you a successful trader.

Forex Demo

Anyone who is serious about trading needs to have a Forex Trading System that is tailored to them, but there is no reason to start constructing your Forex trading system from scratch.

Why try and reinvent the wheel when you can benefit from other traders years of experience and borrow your trading system’s ideas and concepts?

It’s easy to do, and there are some pretty good Forex trading systems out there for you to work with. Some of them are free and some are very expensive, but the price tags don’t always reflect the actual value of the Forex trading systems. But, many of these systems won’t work for you, and I am not talking about out-right dishonesty here, which can be a big problem when trading. What I am talking about is your ability to effectively trade with the system that you may be considering using or buying.

You need to use a system that matches your life style and personality. If you have a day job (not trading), a Forex Trading System that requires you to stare at a screen all day wouldn’t be appropriate. You would be distracted at work and miss the opportunities to make money, or even worse, you will not close a trade effectively and could lose money.

Some Forex trading systems have a potential to lose 20, 30 or 40% of your money before they are profitable. Can you handle a system that can drop your trading capital to half before making money? Or, are you prepared to have a string of 8 to 10 loses in a row before you have a winning trade? Some of the best traders in the world lose money on more than 50% of their trades. These are all important points

Forex Demo

Anyone who is serious about trading needs to have a Forex Trading System that is tailored to them, but there is no reason to start constructing your Forex trading system from scratch.

Why try and reinvent the wheel when you can benefit from other traders years of experience and borrow your trading system’s ideas and concepts?

It’s easy to do, and there are some pretty good Forex trading systems out there for you to work with. Some of them are free and some are very expensive, but the price tags don’t always reflect the actual value of the Forex trading systems. But, many of these systems won’t work for you, and I am not talking about out-right dishonesty here, which can be a big problem when trading. What I am talking about is your ability to effectively trade with the system that you may be considering using or buying.

You need to use a system that matches your life style and personality. If you have a day job (not trading), a Forex Trading System that requires you to stare at a screen all day wouldn’t be appropriate. You would be distracted at work and miss the opportunities to make money, or even worse, you will not close a trade effectively and could lose money.

Some Forex trading systems have a potential to lose 20, 30 or 40% of your money before they are profitable. Can you handle a system that can drop your trading capital to half before making money? Or, are you prepared to have a string of 8 to 10 loses in a row before you have a winning trade? Some of the best traders in the world lose money on more than 50% of their trades. These are all important points

Forex Trading Course

With a consistently successful trading strategy, and a conservative compounding strategy; you could turn a $5,000 account into a $1,000,000 account in just over 1 year. Let me explain before you all go running to open a FOREX Trading Account and lose all your money.

By investing 10% of your account on a daily basis, and averaging pips/day in profit your account would increase by 2% on a daily basis. For those of you familiar with compounding, you understand how this can lead to such a major growth in your account.

So, here is another obvious question. If the fund has been averaging such astounding results over the past year, why can't they invest enough money to reach their limit? And, if they can, why aren't they?

Here is the answer to all of the questions. If they were that good, you would never know about them. It's just that simple. The greatest traders are growing their accounts and reaching their limit day after day.

I promise you this - they are not using anyone else's trading strategy, they are using their own. That's right, to become a truly great FOREX trader, you have to learn what works best for you, not someone else.

The most efficient way to reach the pinnacle of your trading skills is through an elite Forex trading course.

Are you still thinking about letting someone else handle your trading for you?

Here is one more reason for skepticism. Many spreads charge you a per trade transaction. This is an absolute no no. In this arrangement, they are guaranteed to make money on every trade. You, on the other hand are not. Avoid dealings with anyone who will make money on your losses.

Online Forex Trading

terms of U.S. dollars, while the U.S. dollar itself is commonly quoted in the Japanese yen, British pound and the Euros.

Here is an example to depict why foreign exchange service is required. A person traveling from the U.S. to Australia would require the Australian currency during his stay there. He would then be required to go to a money exchanger and get dollars exchanged for Australian Dollars at the exchange rate existing on that day.

All trades related to foreign exchange are based on purchasing one kind of currency against another. This gives rise to the concept of pairs like the Euro/U.S. Dollar. The first currency in the pair is referred to as the base currency (the one that provides a baseline for the purchase or sale) while the second one is termed as the counter or quote currency. While buying, an exchange rate specifies how much should be paid in the counter or quote currency to obtain one unit of the base currency whereas selling involves how much shall be received in counter or quote currency upon selling one unit of the base currency. The 15 important currency pairs are EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD, EUR/JPY, EUR/GBP, EUR/CHF, GBP/JPY, AUD/JPY, CHF/JPY, EUR/AUD, GBP/CHF, and NZD/USD . Foreign exchange quotes are a relation between currencies. For example, quote USD/JPY 108,91 would mean that 1 U.S. Dollar costs 108,91 Japanese Yens. market is considered the largest and most liquid market in the world, trading around $2 trillion on an average every day. It is larger than all equity markets combined.