7 ENTRY Techniques based on Specific Market behaviour

7.1 Trading Volumes

When the market starts trending the only way that the market participants can stop, slow down or reverse the trend is to enter a huge amount of orders in the opposite direction of the prevailing trend. This can happen subtly 6 to 10 times a day. Using market volumes is the only way of catching these turning points.

You need to have the 1 minute chart open showing the volumes being traded. A huge increase in volumes (2 or 3 times the previous bars) while the price is trending can:-

1. Slow the trend down,
2. Stop it or
3.  Cause it to reverse.

A huge increase in volume is likely to reverse the direction of the trend. See the example shown where the volume increased by 2 to 3 times the previous bar.

You would enter a transaction when you see this happens on the 1 minute chart. You will normally have 30 to 60 seconds to enter before the reversal actual happens, so your need to be quick! The chart below shows how this can occur a number of times within a few hours.

Volume is available from most MetaTrader brokers and can be added to your charts using Insert > Indicators > Volume > Volume

Back test your trading charts using the 1 minute charts with volume loaded. You will be surprised.

Volume is actively also used in our With All the ODDS scalping techniques. See the details at the end of the book.

Again this is not an entry technique that will give you 100% reliability but it sure works most of the times.

Basic techniques on How to trade turning points using Volumes

1. Set up your trading charts to the 1 minute time frame
2. Load the volume indicator
3. Trade in the opposite way when there is a trend and at the same time a sharp increase in volume. This has to be done within 30 to 60 seconds of the sharp increase (twice to 3 times the recent volumes)
4. Use 14 to 20 pips for your stop loss to start with and refine later based on your experience
5. The sharp increase in volume should reverse or stop the trend
6. Refine this technique as your experience increases.

7.2 Using exhaustion points

The market moves in vibrations or beats. The turning points of these vibrations are caused by trend exhaustion levels allowing the price movement to stop and then to trade in the opposite direction. The distance between the major turning points (trend exhaustion levels) are referred to as the vibration level. This behaviour occurs on all charts – from the 1 minute to the monthly charts. On the longer term charts they are called “Beats.”

There are many ways that Forex traders try to determine the trend exhaustion points. Some of the most popular techniques and tools used are momentum indicators, support and resistance techniques, Elliott Waves, Fibonacci levels, Pivot levels and candle stick formations etc. They all work with a certain degree of success. Any currency has an hourly pulse or rhythm and a daily pulse or rhythm.

Any experienced Forex trader knows that the trading conditions in the US, Friday, Forex market at 9:00 New York are vastly different from the Asian, Tuesday, Forex market at 13:00 Tokyo when trading the Canadian Dollar. The differences in demand and supply and traded volumes of the Canadian Dollar can easily be seen in the volatility (trading range) of the currency and in volume information. You will see that we refer to these differences as the currency having a measurable high or low vibration rate at these different times.

Let’s assume that the normal currency vibration levels for a currency cross at a certain time of day is say 20 pips. It is therefore not unreasonable to anticipate a possible move in the opposite direction once the price has trended 20 pips. You are therefore giving the trade a high probability of success. At around the 20 pip level, the price is likely to become exhausted and will do a retracement or complete reversal.

On a larger timeframe the chart below shows a clear 140 beats for the GBPUSD during the period shown. So when there is a trend in the GBPUSD there is a good chance that the trend is likely to be exhausted after 140 pips.

The ZigZag indicator can help towards measuring the beats of a currency

The ZigZag indicator can be found on the MetaTrader charting system by following this menu sequence > Insert > Indicator> Custom> ZigZag – You can use the default settings.

The philosophy is that when the price has moved by approximately the average beat or vibration it is ready for a retracement and these retracements can then be traded using your selected retracement trading method.

Please treat Beats or vibrations as guides when the price trend has a good chance of becoming exhausted and not as a precise entry point. They are best used in conjunction with other bounce methods such as support and resistance.

This link is to externally supplied information and it’s availability into the future can not be assured. You will see graphs giving the average hourly trading range (volatility) for each currency and also the daily trading range for each day of the week.

Basic technique on How to trade turning points using the Exhaustion Levels

1. Establish probable exhaustion levels based on the currency, timeframe and time of day you are trading.
2. Expect a turning point when the price has trended by the exhaustion distance in pips
3. Use any of the reversal methods discussed in this module to confirm and enter your transaction.
4. Enter stops and targets appropriate to your currency, timeframe and time of day
5. Amend this approach based on your own experience.

7.3 Time of day principles

The next group of orders we are going to cater for are the ones based on time of day factors.

Time of day factors revolve around the economic announcement schedule and the Opening and Closures of financial markets in Asia, Europe and the US.

Please click on this link to download our module on time of day trading which is supported by 3 videos.

Below are some examples of turning points occurring when the major markets open and close.

Times when moves occur in the Forex Market are when the main markets Open and close. Round about these times there is a high probability of being the start points of trends:

• The open of the Asian market 9:00 am Tokyo Time
• The open of the European market 7:00 am GMT
• The open of the UK market: 8 am London time
• The open of the US market: 8:30 am New York
• The Close of the London market 5:00 am London times

Use www.timeanddate.com to workout how these times relate to your local times.

Basic technique on How to trade Time of Day considerations when
trading turning points

1. Be aware that certain times of day have a high probability for trend reversals as discussed in the Time of day module of this series.
2. Suspect a turning point or strong continuation when the time of day occurs
3. Use any of the reversal methods discussed in this module to confirm and enter your transaction.
4. Enter stops and targets appropriate to your currency, timeframe and time of day
5. Amend this approach based on your own experience.

7.4 Fundamental news

Fundamental news can

• Cause the market to consolidate prior to the news being announced
• Cause huge breakout moves if the news is unexpected (different from expected)
• Cause trends if a series of news announcements are positive or negative for a particular currency
• Be totally unexpected when unscheduled news events occur which impact the Forex market.

In general it is best to treat these events as, above average risk events, full of uncertainty. A straddle approach has been suggested earlier in the module but treat it with caution.