Short-term trading. Entry points on the lower timeframes Daily

Sometimes there are situations where, despite the presence of a signal, the possibility to enter the market there, because they do not meet the minimum required ratio of the potential profit to risk. The risk is too great, or the potential profit is too low.
Often in such cases, you can still get an excellent ratio profit / loss and enter the market, but you need to go to a smaller timeframe. For example, if you are basically trading the Daily, the entry into the market will be determined on the hourly timeframe.
In this article, we will consider this approach as an example.

Content

• GBPJPY, D1. The signal level at the sample
• GBPJPY, D1. The signal level on the rebound from
• GBPJPY. Entry points on the smaller timeframes
• conclusions

GBPJPY, D1. The signal level at the sample

We analyze the currency pair GBPJPY, daily timeframe. On the chart for two to two and a bearish or bullish candlestick formed a support level from borders - 142.13 and 142.81.

After that the price for some time stood still, and then on January 9, was broken the support level. In the market there has been a bearish trend and a sell signal was generated at the sample (Figure 1).

Figure 1. GBPJPY. Break of the support level.

Immediately open a position on the sample can not, you must first assess the potential risks. Reliable stop-loss when entering the sale is placed in the area nearest the resistance level. Its upper limit of 145.36, the lower limit - 144.40
In this example, the stop-loss size is approximately 450 points (Figure 2). In order to be able to open that position, it is necessary that the size of the potential profit is equal to at least 900 points. In this situation it is too ambitious goal, even for such an active currency pairs like GBPJPY. In other words, take a position, focusing on the daily timeframe, we can not.

Figure 2. GBPJPY. The distance to the stop-loss.

GBPJPY, D1. The signal level on the rebound from

What to do in such a situation? The first option - expect the correction and look for a signal to hang up on the daily timeframe. The second option - to move to a smaller timeframe, and have it waiting for the signal to enter the market. For this purpose it is necessary to plot levels smaller timeframe. It is important to understand where the nearest support and resistance levels. They allow you to determine the point of entry and exit. We return to our example. the level of resistance was formed a few days before the breakdown of the support level, its lower value - 144.40, the upper - 145.36.

The market then aggressively moved down and started deep correction, which is the length was approximately equal to the impulse.
Price comes to the opposite level. Here, if we wait for the formation of a bearish candle is formed on a release signal (Figure 3).

Figure 3. GBPJPY. Deep retreat.

This is a deep retreat - a signal that appears near the opposite level. Such signals generating maximum ratio to profit potential risks. Often, you can open a position with a small stop loss and a significant profit potential.


GBPJPY. Entry points on the smaller timeframes

Another way to find an entry point into the market in such a situation - the entrance to a smaller time frame.
January 27 the market touched the opposite level (Figure 4). Once there was a fact of touch, we can move to a smaller timeframe to find an entry point into the market. We are trading with the trend and need to look for signals on the slide.

Figure 4. GBPJPY. As for the market of the opposite level.

Touching level was 27th. We go to the lower timeframe and we see that the price went up to the resistance level of day timeframe and began to beat him. Next on the hourly timeframe formed a support level, which appeared upon the closing of bullish candle at 9 o'clock in the morning. The lower boundary of this level - 144.25. Break of the level takes place within a few hours. This suggests that the trend on the hourly time frame has changed and now it is bearish, a sell signal appeared (Figure 5).

Figure 5. GBPJPY. Break of the support level (H1).

Let me remind you, on a daily time frame trend as bearish. When, on the threshold of the signal on Daily, the trend of lower degree turns and direction of the market both in the hourly and daily for the same time frame, this means that can appear very interesting signal.
This is what happened. Upon the closing of the candle, we can identify potential risks at the points to measure the size of the stop-loss. When trading hour timeframe stop-loss is placed at a level that was formed on the hour timeframe. In our example, this level appeared 6 hours before, stop-loss is about 65 points (Figure 6). I recommend to put a stop loss with a small margin of the upper resistance level of the border (the price - the value of 144.70).

Figure 6. GBPJPY. The price for the installation of stop-loss.

In this case, when the entrance to the market occurs at a potential reversal day trend, take profit can be put on the larger timeframe, in our case - by Daily. These are ambitious goals, to which the income is not always the market. Therefore, we can take some profits in the region of levels built on the current timeframe, or hold a position focusing on the more distant targets. As a result, the ratio of potential profit to risk is two to one in the Daily to four to one on the hourly timeframe.
The market has formed a deep correction and signal appeared on a release (Figure 7).

Figure 7. GBPJPY, H1. The signal at the retreat.

As can be seen, it was possible to enter both the sample and on the rebound. Both the signal of the exhaust - the market for some time standing still, then collapsed (Figure 8).

Figure 8. GBPJPY, H1. Testing of the sample and the signals on the rebound.

conclusions

Summarize. The potential reversal points on large timeframes market can look for signals to enter the smaller ones. For example, to analyze the levels at the Daily, but look for an entry point in the direction of the main trend on the hourly timeframe. Objectives It is possible to determine both the day-and-hour timeframe. This approach yields the highest ratio of potential profit to risk. At the same time it requires more attention and time spent on the analysis of the market.

Traders often complicate the process of constructing a horizontal support and resistance levels. For example, plotted unnecessary or erroneous levels. This can be confusing in determining the future direction of the market.

Levels Indicator is designed to solve this problem. It will help to determine the price band, where the market may slow down or turn, will make it possible to more accurately determine the point of entry, which appear in the formation of a deep correction. In addition, the price levels of different timeframes allow for more accurate calculation of the profit potential and the level of risk in each transaction.

This article is a supplement online course "horizontal level in trading."