Let the market dictate your entry/exit

Trader and author Raghee Horner talks about her favourite trading methods and tools.

She mentions, “One of my favorite tools is the IBFX PRS (Pattern Recognition Scanner) because it scans across multiple time frames and pairs and alerts me when patterns have 1) formed and 2) been broken. The determining factor in my opinion, for any entry is the market cycle and when you can use both the 34EMA Wave and the PRS Initial Trend reading, and I believe you can begin to put together a solid trading plan for the current market environment.”

Now, whilst I haven’t tried the PRS myself, I have to admit it’s got potential. Why do I say that? Well, mainly because it can be a real time saver. If you’re one of those traders to loves your technical analysis, especially different patterns, such as triangles, wedges, head and shoulders, double top and bottoms, trend channels, then the PRS can be a real help. Please note, I’m not propagating the PRS alone. ANY tool which alerts you of emerging tried and tested trading patterns is something of real value, if you use it correctly. You must know for example, the PRS is not a trading system on its own, rather, it’s merely a tool that allows you the option to enter a trade based on your own trading system, method, parameters.

Raghee continues, “Consider for a moment that many traders will for the most part identify very similar levels on a chart as support and resistance. In fact many popular tools such as pivot points, Fibonacci levels, and whole, round numbers will overlap with one another to confirm that a particular price level is indeed a decision level. I call any support, resistance, or trendline “decision levels” because it is at that point on the chart that traders are making a decision to either buy or sell. If you can consistently identify these levels correctly using whatever method at your disposal, you will find that prices will commonly accelerate, stall, or reverse from that level and then you know you have identified a level that the market as a whole is reacting to.”

This is a very important point. If there was a way of consistently making a profit from the market, by identifying the key areas of support/resistance, fibs, pivots, you’re basically on to a winner of a method. Too many traders rely on indicators. By all means, use indicators, but don’t rely on them alone. You’ll find your edge with Support and Resistance.

To read the rest of Raghee’s post, visit:

http://www.ibfx.com/Corporate/post/2010/07/16/Letting-the-Market-Direction-Dictate-Your-Entry.aspx