What is entry point in Forex is the question.
The point at which you enter into the trade with buy or sell Forex order type is the entry point.
What is Entry Point in Forex
That point defines market execution price for a currency pair you are trading. Entry point will define what will be the start of the trade.
If you are buying a currency pair the entry point should be below profit level so you make money at the end.
In case of sell order the entry point should be above profit level so you make money at the end.
Entry point referred to a price at which you will enter into the trade. That point should be at the best place so when you enter into the trade, the market should move in your direction.
It is not easy to predict the correct entry point. If you are trading then you know that the majority of entries you have taken becomes losing trade at the beginning.
That is the case when you enter into the trade and immediately the market turns against you. The market decides to change direction instead continuing moving where you predicted.
To have a good entry point in Forex you need to have a strategy that will help you define that entry.
If you have a good strategy and you are patiently waiting for the entry point then you should not have too many problems.
Entry point is not only one important point in trading. When you enter into the trade you need to have an exit point. Exit point defines where you will exit with loss or profit depending how the market moves.
If it moves against you then you need to have set a stop loss exit point so you do not lose too much money.
If the market moves in your favor then you need to have set a profit level point so you exit with the defined profit.
Understanding Entry Point in Forex
To understand entry point in Forex it is best to give you an example.
In the image below I have a window which is open when you want to open a new order, whether sell or buy.
That window on the left side has a chart that shows what is the current bid and ask price.
Your job is to define when the entry point will be ok to enter into the trade. To make a decision and find a suitable entry point you can look on the chart and find a price at which it will be fine for you to enter or you can have a strategy that will help you define an entry point.
If you choose to enter into the trade by looking on the chart on the left side you need click on the Buy or Sell button on the right side.
Have a Strategy
If you decide to make a plan and have a strategy that will help you define which entry point will be ok for you then you can have a look on the chart below.
Your strategy can tell you when is the best time and price to enter.
Image below on the left side has a start point which could be a nice entry point. If your strategy defines and you agree with that, that the entry price should be at 1.13635, you would make money.
You would make money with the buy order because the price has started to rise. The entry point were very good and your trade was profitable.
Understand that the entry point in Forex sometimes can be defined with a bad result.
Imagine that you have defined an entry point with sell order on the entry price at 1.13635.
The price was rising and your trade would be bad trade with the loss on your account.
While there are many entry criteria you can have, for the entry point you need to find the strategy that will give you 6/10 correct entry points with the same lot size. That way, 6 of 10 trades will be profitable and you will make money.
If you have more bad trades than good trades you will lose money from your account. And that is not a good road to go for a long term.
Forex Entry Points Criteria
To make a good strategy and to have a good criteria for an entry point you need to follow certain rules.
Rules are there to help you to find the best entry point and to protect you from yourself and from the unpredictable market conditions.
One of the great tools to create an entry criteria is to define a trend. When you have defined the trend on the chart, you can easily see where the entry point could be.
Use Trendlines for the Entry
Each trend has pullbacks. That is the time when the trend stalls and returns back and after that continues to move further in the previous direction.
Your entry point would be on the pullback when the trend stalls.
If you draw horizontal resistance and support lines with the uptrend or downtrend support and resistance line, you can have a much better picture for the entry point.
Take a look in the image below.
In the image above you can see what I mean when the trend support or resistance line meets horizontal support or resistance line.
Where the horizontal and the trend line are crossing, that is the best place to have an entry point.
While the trend is downtrend you can look for a pullback. That pullback should end on the horizontal resistance line.
In the image you can see where the word resistance is written. On that place you can see the trend line.
That place is a very nice entry point to enter with a sell order. As you can see if you enter on that point you would enter on the right moment and your trade would be profitable.
Use Candlestick Pattern
With horizontal and trend lines you can use candlestick patterns that will give even more stability into the entry point.
For the downtrend you would look for bearish candlestick patterns like bearish Pinbar or engulfing bar.
Those two candlestick patterns are good confirmation of an entry point.
Different Time Frame
What you will learn through time is that you can use different time frames to define where the best entry point is.
If you follow the trend you should use H4 or a daily time frame.
Those two time frames have much better results in following the trend so you will minimize a number of bad trades if you trade H4 and daily time frame.
When you define that H4 or daily time frame is a good time frame to trade then you should pay attention to take a look at the H1 time frame.
H1 time frame can give you a nice entry point on the support or resistance for a larger time frame.
If you use this kind of strategy you will minimize the possibility that you will enter too late or too early in the trade.
One of the greatest problems new traders and also experienced traders have is the entry point.
If you know when to enter other stuff is much easier, but that is not so easy. Entry points are hard to find and to be better in defining entry points you need to practice.
With practice and experience you can be sure that you will improve in defining entry points.