Three things have to be taken into account before trading. And this applies to all markets.
You first need to watch the trading signals showing you the best time to enter the trade. The signal can be in the form of a candle, it can be the price level or a cue received from a technical indicator.
Secondly, you have to decide for how long do you wish to hold the position opened. It will vary mainly depending on the market you are trading on. If you are trading, for example, fixed-time trades you can enter the trade for just 1 minute.
And thirdly, you will have to define the point of closing the transaction. This is somewhat connected with the second point and like the previous one, depends largely on the market you are trading on. For example, for the currency market, the exit point will be strictly specified by take-profit and stop-loss.
I will take all the above under consideration while presenting to you the possibilities of trading financial derivatives by specifying 5 different signals to enter the trade. Please continue to read to learn more.
Contents
For how long keep the position open
In this guide, we focus on trading financial derivatives. Therefore, we need to specify the duration of each trade. Here I chose the EURUSD currency pair. I will operate on the Japanese candlesticks chart with the candle interval of 5-minute. The duration of each trade I set for 15 minutes. Now let’s discuss 5 different trade entry signals.
Trading signals worth searching for
Trade number 1. Bullish pinbar with the bottom touching the strong support
As you can see in the below chart for the EURUSD currency pair, I drew a support level. It touches multiple lows so it means strong support. At some point, the larger candles appear signifying the market starts trading. At the highlighted moment, I predict prices to rise again as the two bullish pinbars develop and their lows touch the support line.
I enter the trade at the moment of closing of the second bullish candle and it will be a 15-minute buy position.
Trade number 2. Breaking the support.
In the chart below you can notice the area where the bearish pinbars start developing indicating the trend stopped to go upward. Although I am pretty sure the trend reversal is taking place here, I would wait until the price breaks through the support. After that, you can see the orange candles became longer so it is a strong downtrend.
My entry point is the moment when the price breaks out the support level and it will be a 15-minute short position.
Trade number 3. The appearance of a hammer on the support level with rising RSI.
In the third example, you can notice a strong downtrend. But eventually, it becomes exhausted and the market begins to fluctuate within some range. It is difficult to predict the direction until the hammer appears. It’s low touches the support line. It is the signal for me that the price will rise. The RSI indicator is rising to confirm my theory.
When the price touches the support level and creates a hammer I enter a 15-minute long position.
Trade number 4. The appearance of Doji at the support level with rising RSI.
It is not easy to trade with Doji candles because they are showing the indecision of the market. If you want to trade with them effectively, you should always check the candles that appear after Doji. In the exemplary chart below Doji has formed on the support line. What appears next is a green candle. I would wait till the following candle develops to confirm price direction. RSI seems to confirm my assumptions.
When the second bullish candle appeared after Doji on the support level, I enter a 15-minute buy position.
Trade number 5. Price definitely brakes the support with a solid bearish candle.
The price is ranging. At some point, it rises and then starts to fall. The market bounces three times showing high respect for support level. This signals the bulls are not ready to surrender. The best idea is to wait for the subsequent candle to form. Here the bullish candle has developed.
At the next bullish candle opening, I enter a 15-minute sell position.
Overview of the 5 signals to enter the trade
- The first signal we described consisted of 2 bullish pinbars. Their lows were touching the strong support so we could be pretty sure the market will go upward.
- The second point to enter a trade was the moment of price breakout from the support level.
- The third signal was the appearance of the hammer together with rising RSI.
- The fourth was a formation of Doji on the support level together with rising RSI and the development of bullish candles afterward.
- And the fifth signal was breaking the support that appeared as a strong bearish candle.
Summary
To read the signals of trade entry from the chart is a skill you will need to practice a lot. When your eye will be sharp enough to recognize various candle patterns and then make sense out of them, you would have all the chances to become a successful trader. Of course, there are other skills required like drawing support and resistance levels or using trading indicators such as RSI.
Use your time well and start practicing on the Olymp Trade demo account. When you gain confidence move to the real one and earn, share your experience with us.
Wish you only profitable trades!
