The following is from an exchange on the Global-View Help Forum
San Diego bobl 17:58 GMT December 9, 2008
There is no exact formula for entries or exits. However, most experienced traders recognize one common fact; that is PRICE. Price is the only controlling factor in your performance. Techniques, methodologies, and tools vary as well as the information written or spoken by different individuals. From over 35 years of trading and studying everything under the sun, I have derived specific formulas for entries/exits. I can't teach that in a paragraph or two, but let me offer some guidelines.
Fact: The longer term view of any currency pair is more valuable than short term fluxuations, therefore many experienced traders utilize a top down approach......for example: 200 weeks min. of weekly chart; 100 days of daily chart; use 4 hr, 2hr, and 1 hr. charts to get the shorter term picture. Anything short of a 15 min. chart is very difficult to rely on for any trade values. The object is to find trades where the time frames line up, i.e. if using candlesticks, weekly,daily, multiple hourly frams line up in the same color, red or green. This situation conveys a message of some standard of trend, everything going the same way, and your probabilities become stronger for success. There are many other qualifications, which must be learned, but they include chart patterns/structure, proper use of support and resistance, correct trendline use, and understanding how to use moving averages (this is very misused tool).
Indicators and oscillators have their good days and bad days. Overbought or oversold can continue way beyond the parameters used commonly. Indicator divergence has some merit, but generally a double divergence is much more effective than a single.
There is a tool in some chart packages, or the alghorhytm can be written, for :"floor trader numbers".........which is very effective tool for seeing the daily central pivot point, 1st and 2nd support and resistance. These are very helpful for entries. A guideline I use MOST of the time is that to go long and entry, the cross must be trading above the daily pivot and moving in that direction when I make the trade.........opposite for sales. Nothing matters more than price.........so, common sense says to buy/sell in the direction of current price movement. Many traders fade price, but in my experience only very sophisticated long term traders are successful fading price. Trying to buy lows and sell highs is just plain difficult and this method by default means you're buying a market that is falling, and vice versa.
If you would like more specific information or tools for execution, please contact Jay and we'll see what we can do for you.