Practical example for entering a trade – GBPUSD
Do you want to know about a bad and a good entry for a forex trade? This trade is from 13th April, 2020. It was overall a slow forex trading day because of the Easter holiday in most part of the world. Normally I don’t trade if it’s a holiday, however yesterday I identified a trade setup for GBPUSD which I could not resist to enter.
I entered into this trade twice. And I will explain both entries below.
My first entry was around 16:30 GMT+8 (That’s my time zone) – That was not the perfect entry. I would call it a premature entry because I did not wait for the market to settle before it takes off in the anticipated direction. This is not the way normally I trade, however I had few other things to do and I knew I probably won’t be able to sit and wait for the trade to be ready.
But one thing I always do before entering any trade, I do my homework very well to understand sentiment and direction of the market. And based on my homework I think I was in the right direction for this forex trade entry.
The trade performed initially and then it turned into the opposite direction, which I was expecting however not by that big margin. By the time I realised, my forex trade entry was in negative. Although I got a chance later to close the trade at a minimum possible loss, but I decided to let the trade run just to demonstrate a powerful lesson for this post (we shall get to the lesson towards the end of the article). For now check out the trade below and you can see that the trade turned back into right direction later on.
Later around 22:00 GMT+8, I entered the same trade again. But this time I closely monitor the trade for a right entry, I let the market to settle and patiently waited for the best time to enter the trade.
My Final Thought
Let’s talk about the lesson we learn from this example of entering and exiting a trade. If you see the time passed from the first entry of the trade to the point it finally started performing, that’s almost 6 hours.
Now, this kind of waiting period not only make forex traders impatient but also it can make them panic to exit the trade, especially if the trade starts moving in the opposite direction for the short term. So always let the market do its adjustments and wait for the right timing to enter the market.
However, if you plan to still enter a trade (only after you have done all your homework to anticipate the direction of the market, then keep your stop-loss wide enough to avoid auto stop loss. In my case, since I knew I am prematurely entering into the market so I had a much wider stop loss in my trading platform.
I highly recommend traders to always enter a trade on the right timing. It was a nice trade but I exit the trade even before my targeted price point was met, cause it was time for me to call the day off. I never let my trades run over night. However later on targeted price point was met as shown in image below.
