High profitability traders only take trades that have a high probability of working in their favour. Hence having consistent high profits from the market. High probability trades have a particular make up that should always be followed when trading. Support and Resistance or Supply and Demand is the major indicators used by high profit traders. Trend following is next in line as the trend should always be your friend. Traders who follow the trend and know its reversal points are always consistently profitable. Pattern and technical traders use specific rules to ensure that they enter and exit the trend at the right time. All Trades should be taken with confluence and explicit evidence of what is going on in the trade.
Support and Resistance
In technical analysis, support and resistance is a concept that the movement of the price of a security, will tend to stop and reverse at certain predetermined price levels. These levels are denoted by multiple touches of price without a breakthrough of the level.
A support is a zone which the price of a pair tend to have difficulty falling below it while Resistance is a zone where the exchange rate has difficulty breaking above. Most of the times these levels will hold true and price will bounce up from a support level and fall from a resistance level.
Traders normally keep an eye out for these levels as they, in confluence with other markers, provide high probability trade entry points. There are times when price breakout of some of these levels so it is always advisable to look for confirmation before entering a trade. Some traders use indicators to confirm their trade while others use price action and seek bullish evidence at a support level to see if price will bounce and also bearish evidence at a resistance level to see if price will fall.
Trend
"The trend is always your friend' is a common but absolutely accurate term that is used in trading whether Forex, stocks or futures. Following a trend can lead to huge profits and a mega boost to your trading account. Hence it is always good to know what kind of trending is taking place, when to get in the trend and obviously when the trend ends so you can collect your profits and exit the trade.
Therefore high probability trades take into account trading with the trend and following it until it ends. Your trading strategy needs to identify trends and the best entry and exit points.
There are different types of trends and it is always good to know which one you're in at the moment so most of your trades will take place in that general direction. A good way to look at the trend is to go on a time frame such as daily, weekly or monthly to see what's been happening in the market for that entity. Some traders use resistance and support regions to identify entry and exit points, others use patterns to spot reversals or continuations, while other traders use indicators and fundamentals to follow their trade. The key is always to incorporate the trend in your trading strategy so as to increase your profitability.
Confluence
Confluence by definition is;
noun
- A flowing together of two or more streams, rivers, or the like.
- Their place of junction.
- A body of water formed by the flowing together of two or more streams, rivers, or the like.
- A coming together of people or things; concourse.
- A crowd or throng; assemblage.
Therefore in forex trading it is when multiple indicators, signals or price action story is indicating the same thing. So for example you are using a slow and a fast moving average, the MACD and Resistance and Support levels. Then price reaches a support level and is bouncing off of it, the fast moving average is crossing above the slow one and the MACD is moving above the zero. All these factors is an indication that or has a high probability that the price will go up. Here we say you are trading with confluence since multiple indicators are saying the same thing. Trading this way gives high profit trades.
On the other hand although trades executed with confluence produces high profit trades, waiting for too much things to come together may provide limited amount of signals. Therefore there needs to be an optimal amount of things to wait on to come together to give a signal otherwise you might be waiting for an extremely long time to get one trade.
News impact
Trading news impact can be costly as it can be profitable. The news can cause much volatility which can lead to trades stopping prematurely or getting maximum profit. Therefore you should always check to verify what is happening in the news before you start trading. Most traders make it a part of their pre-trade routine to check the economic calendar for high volatility news events. As a trader I rarely trade news events as most of them cannot be accurately predicted and the market normally responds in a reactive way to news be it negative positive or what was forecasted.
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