1. We identify a buying opportunity as a pullback down to support when the market is an uptrend
The part where the price stops going down is called support. Lets make it simple and easy for all. Some people call it the demand zone. Either way, prices will bounce off that level.
2. We identify a selling opportunity as a rally up to a resistance when the market is in a down trend.
If the market is in a down trend, we enter trades when it rallies up to resistance. You can understand this better by looking at the chart below.
Its a level where the price stops going higher. That’s resistance.
3. Longer Term Charts are the Way to go
I don’t want to mince my words but here I want to say it again, longer term charts are the way to go and I would recommend that all beginners trade with the daily and weekly chart. The smallest you can go is the 4 hour chart.
4. Increase the number of pairs that you are Looking at. Add Crosses to the Mix.
I like to look at the majors but I would like to put forward the fact that crosses adhere more to technical analysis than the major currency pairs do. For the majors, the downside is that there tend to be a lot more spikes beyond support and resistance levels and that happens in my opinion because a lot of people are looking at those levels and a lot of emotions come into play. So what the big boys do is that they take out the weak bulls or the weak bears. Or in other words, traders with a position on but with a small stop loss just beyond those support and resistance levels.
For the crosses and lets take the EUR/GBP. If the EUR/GBP holds the support line or retraces from a resistance, nobody really cares. There is less emotion. What causes the price to move are the orders. With crosses you have more chance of succeeding with technical analysis.
So my take is that you add the crosses into the mix of currency pairs that you monitor and take advantage of the opportunities that come your way.
I hope the above tips have been helpful for you. Trading is simple but never easy. Remember to trade the longer term charts when you are beginning to trade and always try to identify the trend. Expand your opportunity horizon and add crosses into the mix.
To your trading victory!