In this post I will give you a breakdown on how to enter a trade using Indicators, specifically moving averages.
This method can be used on multiple timeframes but I specifically use it when looking for positions on the Hourly Timeframe.
Let’s say for example you see price reaching a level of resistance and you know that price is going to reverse, you don’t want to jump in too early as you know price might spike and stop you out BUT you also don’t want to enter too late as you may lose some pips and ultimately it will make placing the trade pointless.
What you need to do is draw your support and resistance lines, I have taken a screenshot of GBPUSD and drawn support and resistance lines on the chart for this scenario, I have highlighted the area of the chart that we are focusing on for this example:
As you can see from the chart above price was rejected at resistance and dropped down and almost hit support which was obviously what we wanted, but if we waited on the 1H chart until that wick had closed we would have missed the trade. What we would need to do is scale down on a lower timeframe and see what’s happening.
We are now on the 15 min time frame and we can see that price got rejected then started to fall towards support and we could have placed the trade on the second wick as it opened below the rejection wick. But if you don’t know what you’re looking for that can look a bit confusing so let’s add a moving average on that chart.
I added 2 moving averages to the chart 25MA and 50MA, Once the two crossed we can clearly see that was the opportunity to sell and price did indeed fall and touch support.
It then bounced off support and crossed again for the BUY signal.
We can also do this with the Alligator as its another form of moving average:
As you can see once all 3 moving averages are above price it indicated a sell signal!
The point of this post was to shed some light on how to enter trades and not be stuck in the red for to long hoping your trade will come in. This tip is not to be used on its own but in conjunction with your own trading plan. I would only use MA’s on a 15 min timeframe and prefer a less cluttered chart.
I hope this helps someone!!