Placing a Trade in The Forex Market

Placing a trade in the forex market is basically the same as placing a trade in any other market. Some people get confused because they feel they are not buying or selling anything like in the stock market, were you buy or sell part of a company.

We will dissect a trade from beginning to end in order to understand what is being done in the process.

Step 1: The trader has USD 10,000 in his forex broker account.

Step 2: In the morning the GBP/USD quote is 1.7478. This means that every GBP (Great British Pound) is worth 1.7478 dollars (i.e. 1:1.7478). Based on his analysis, the trader thinks that within the next 24 hours the GBP will gain strength against the US Dollar (i.e. a single GBP will exchange for more dollars). The trader wants to profit from the speculated move.

The System of Forex Intraday Pivots Trading - HOW THE TRADE SYSTEM WORKS

When price penetrates a pivot number, it often retraces back to the pivot, and touches it briefly. If it was support that was penetrated, and it does not move back up above it, but continues to hover just below it, there is about to be a drop in price.

At the point that it retraces after dropping below support, enter a sell with a modest stop loss somewhere on the other side of the broken support line. Notice the illustration below of the USD/JPY at 2 am EST. The price had just broken below the S2 number, which was 123.38. It briefly touched the 123.38 to 123.41 area and then began to descend. As you can see, it moved down all through the European and US market sessions.

The System of Forex Intraday Pivots Trading - HOW THE SET-UP SYSTEM WORKS

After you have calculated the pivot numbers for the day, place horizontal lines on your 5-minute and 1-hour charts at the pivot numbers for the day, or at least as many lines as your chart gives you room for. It should look something like this:

The lines in the above illustration represent five of the nine calculated numbers. On this five-minute chart, that was all there was room for. The nine numbers are:
R2,M4,R1,M3,Pivot,M2,S2,M1,S1