Spot Forex Trading Part 2: Effective Use of Price Alarms
By: Mark Mc Donnell | Posted: 05th July 2007
This article is Part 2 of a series of 9 articles dedicated to help anyone to trade the foreign exchange.
The spot forex is a support and resistance market. Period. Whatever tools and indicators you are using to trade the spot forex market, the experience can be greatly enhanced by understanding near term support and resistance along with longer term support and resistance numbers for the currency pairs of interest.
Every spot forex trader and the major institutions are watching critical areas of support and resistance on the various pairs. If any major pair breaks through a critical support or resistance number it makes news everywhere on the forex newswires or on national and global
news shows.
Support and resistance is somewhat repetitive, the major support and resistance numbers tend to repeat themselves over time as the pairs range or trend up and down.
Monitoring the critical areas of short term or long term support and resistance on the spot forex is easy using price alarms. You can use desktop alarms, alarms to wireless devices, or email alerts when prices are breached. Make sure your broker of
choice gives you the ability to set price alarms and alerts. They should also provide them for free on their trading platforms.
Price alarms can be used for the various needs of a trader.
If a currency pair is currently trending price alarms can be used to notify the trader when the trend is resuming so you can intercept the movement. Another use is to set price alarms at specific support or resistance prices where the indicators can be reevaluated for profit taking.This assists with money management.
Another use is for setting price alarms where double tops and double bottoms can occur, the double tops and double bottoms occur frequently on the spot forex and can represent entry points into complete reversals after large sell-offs or up cycles.
Price alarms can also be set to alert a trader when a pair is going in your favor so you can reset your stops up or down to improve your money management or entry management. Price alarms can also be set on top of partial limit orders or entry orders to notify the trader that an order was executed.
Also if a currency pair is not trending but trading in a narrow range a straddle alarm can be used to assist in to determining a breakout of the current range.
In conclusion the spot forex market knows where these critical short term and long term support and resistance numbers are, the other traders know where these numbers are, and the institutions also know, this means you should know too, don’t waste time staring at the forex all night. Monitor the market with price alarms and go on
about your business, get a lot more sleep and still be in the know as to when your favorite pairs are moving.
Author's information: Mark Mc Donnell is the lead trading plan writer for www.forexearlywarning.com, an inexpensive trading plans service available to all spot forex traders. He has many years of experience trading stocks, equity options and the spot forex. He has spent the last four years of his career devoted solely in studying the movements of the
spot forex, conducting trend analysis, and determining how this impacts retail level forex traders.
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Tags: critical areas, institutions, money management, currency pairs, assists, resistance, alarms, foreign exchange, reversals, trading platforms