1. Trend channels
Trendlines are fundamental tools used by technical analysts to identify support and resistance levels. When the price shows a clear
higher high and higher low movement, it indicates a prominent uptrend.
This enables to determine a trading bias of buying at support and taking
profit at resistance. Once price breaks these key levels of support and
resistance, traders should then be aware of a potential breakout or
reversal in trend.
2. Candlestick patterns
Candlestick patterns are powerful tools used by traders to look for entry points and signals for forex. Patterns such as the engulfing
and the shooting star are frequently used by experienced traders.
As you can see on the chart, the hammer formation is circled in blue. It is known that the hammer signals potential reversals however,
without some form of confirmation the pattern may indicate a false
signal. In this case, the entry has been identified after a confirmation
close higher than the close of the hammer candle. This gives a stronger
upward bias to the trader and endorsement of the hammer candlestick
pattern.
3. Breakouts
Using breakouts as entry signals is one of the most utilised trade entry tools by traders. Breakout trading involves identifying key
levels and using these as markers to enter trades. Price action
expertise is key to successfully using breakout strategies. The basis of
breakout trading comprises forex prices moving beyond a demarcated
level of support or resistance. Due to the simplicity of this strategy,
breakout entry points are suitable for novice traders.
