Price retracement is a concept which works because market price tends to move randomly between key pivotal levels. This constitutes a day trading forex system.
How this Day Trading Forex System Works
This day trading forex system works because market participants never fully agree on direction. And the market in question tends to reverse at these pivotal points. These points are price levels defined by LSS numbers, yesterday’s close and open gaps. Many currency pairs tend to leave open gaps throughout the daily session, especially during the active trading hours. These gaps are later filled, either on the very next day, or days later. A more frequent occurrence is the testing of LSS pivots. Entire forex strategies are based on LSS theory, using both the daily and weekly pivots. The day trader uses LSS pivots much the same way, except that they take into account other factors, specific to that day. News release times identify the exact time when volatility will rise dramatically. Day traders place their trades before and after these news release times. The ones before are counter-trend trades. Whereas the ones after the news release times are in either direction. They simply watch those pivots and expect the market to at least pause moving for a while. Whether it will reverse or break through these pivots depends on the day’s market strength. The LSS based day trading forex system is safer than other systems. Because most other indicators used by traders, are highly inaccurate. Indicators such as oscillators and even chart patterns suffer from poor timing. Other traders use candlestick patterns and high-low point analysis. Candlestick patterns are okay, though one cannot rely on them exclusively, for day trading. Even candlestick patterns are ambiguous, and create confusion. As one zooms in and out on the charts, one candlestick pattern appears as another.
A Better Day Trading Forex System
An even better day trading forex system is one based on all these pivot numbers, as well as the overall daily trend. Learning how to trade forex through these methods, avoids many losing days. Days where the market will simply move with huge momentum, and will reach the most distant LSS pivot. Day traders watching the daily trend know that this is bound to happen on some days. And therefore handle their open losing day trades accordingly. An open losing trade against the daily trend has to be closed, whereas an open losing trade in the same direction as the daily trend, can be left open. Online CFD trading makes it possible to implement this strategy, at low cost, and at below average risk. By allowing you to get the best price possible at those LSS pivot levels. Unlike spot market forex traders who tend to suffer from lack of liquidity, which results in requotes and slippage. Above all, traders need to treat each trading day uniquely, and to expect history not to exactly repeat itself, because it never does. With some research around these LSS pivot numbers one can have a road map during the active trading hours, which many other day traders are oblivious to.
A good day trading forex system is one that offers trading through preparation, by looking at the day’s expected trading range and pivotal levels. Moreover, the daily chart and even the weekly chart are both relevant to day trading. Not all day traders agree on this. But it is proven that one day or another, the intraday support or resistance will be something to do with the daily or weekly chart. After all, the market is made of all kinds of participants, having different objectives and time frames. But they all trade and can make new trades during active hours. Multiple time frame analysis only needs to be done once a week, and it will be relevant for the entire trading week, It’s not something that traders have to do every day. So it is wise to pay attention to the daily and weekly charts. A day trading forex system should look more into the big picture, and less on what happened yesterday. Yesterday’s data may be somewhat relevant, but the new day will certainly make something new happen, which will defy yesterday’s expectations. Various classic day trading methods are flawed or outright wrong, especially those defining support and resistance. It’s better to stick to humble LSS pivot analysis for the day, and handle market momentum accordingly.