How to quickly identify trading opportunities
There’s a common belief that trading needs to be a full-time occupation, but that's not necessarily the case. It’s true you need to be paying attention to what's going on around you, but that doesn't mean you have to be tied to a trading screen 24/5.
If most traders were honest about it and analysed their trading performance, they’d tell you that they perform best over short periods for perhaps just a few hours a day and maybe for only one or two days in the trading week.
Yes, there may be exceptions, for example, the ‘hardcore’ scalper stealing ticks eight hours a day, Monday to Friday. However, thirty years of experience in the markets has shown me that even the talented few who can do this day to day burn out sooner rather than later.
Not everyone wants to pursue or is suited to short-term trading. My personal preference is for a swing trading or positional approach to the market. Identifying and making use of longer-term trends, key support and resistance, as well as moving averages, are all methods for identifying and highlighting trading opportunities. It's the style of interpreting the markets that I’ve built up over three decades. It's what I feel familiar with and what works for me.
That's the key to fitting trading into your existing lifestyle and commitments, and you need to identify what works for you. For me, it means spending a couple of hours a week looking at charts. It may surprise you to learn that even as an analyst I have a limited attention span for trawling through charts - ten charts in one sitting is probably more than enough. The focus here is on quality rather than quantity.
Where do I start looking for trade opportunities?
Why not kick off with a table that shows you daily, weekly, monthly or even annual price changes, such as the one below. You can find this type of performance table on numerous financial websites, but you can also build something similar for yourself using Excel RTD, one of our suite of Smart Trader Tools, that allows you export data out of MT4/ MT5 into an Excel spreadsheet.
This kind of table means you can easily compare performance and look for moves of interest and any outliers, such as instruments that have had a significant move or those that have remained mostly unchanged, over specific time frames.
In the table above, we've highlighted moves in DXY and EURUSD, as well as the move in USDZAR as examples of the type of movement that might warrant a closer look. The next stage is to drill down and look at some charts and assess the opportunities.
In the case of the USDZAR chart below, you would likely think about whether the rand could continue to strengthen or, was now due for a pullback after a very good run.
Perhaps you think that the rate could bounce over the short term. Alternatively, if it tested back to and through ZAR 13.20, then you might have your eye on a further move to the downside to say ZAR 12.80 for example.
If that's your view, then you could enter a pending order. In this case, a sell-on stop order to take advantage of any break below 13.20, as and when it happened. The order will work in the background on your trading platform until it is activated or cancelled.
Get on with the rest of your day
Placing these type of orders means that you don't have to be glued to the screen. Instead, you choose the levels at which you would be happy to enter into or exit out of a trade or trades and having identified these opportunities, you can get on with the rest of your day. Of course, you can monitor the progress of those pending orders on the go using the mobile version of one of our powerful trading platforms
Let technology work for you
Pepperstone’s clients can take this process one step further and utilise Autochartist. Autochartist is a dedicated set of tools designed to scan the markets and find trade opportunities for traders like you. Autochartist can search for and identify recurring chart patterns and can be configured to highlight trading opportunities, which have a higher probability of success based on the historical performance of similar patterns. Autochartist software is available as an MT4/MT5 plugin or as a web-based platform.
What's more, you can use the service on mobile devices, thanks to the availability of Android and iOS apps. The platform is specifically designed to help traders make better decisions, highlight trading opportunities and save time. The software is easy to install, and it's available free of charge to our customers and clients.
Alternatively, if you prefer you can sign up for daily email reports that are sent directly to your inbox, which highlight upcoming macroeconomic events and trade opportunities. If you like what you see you can even execute or place a trade directly from the email.
Find out more about Autochartist here.
Another way that traders can plan ahead and spot trading opportunities is to pay attention to the economic calendar of events, and this can be a potent tool if used correctly. We provide our customers with access to their own economic calendar which can be found here.
Macroeconomic data releases follow a known schedule, and the calendar allows traders to keep tabs on these events, be prepared for and aware of trading opportunities ahead.
Our economic calendar can be filtered by currency and the expected market impact of a release. In this way, we can screen for only those high impact events that affect GBP and USD as an example. We have done just this in the two lists below.
There are only a few scheduled important items due out in the UK during this particular period as above. However, there are rather more high impact data points pending release in the USA, as shown in the image below.
The time and date for these events are displayed on the left-hand side of the table, and the default setting is GMT. However, users can configure the calendar to a wide variety of time zones by using the drop-down menu.
So if you’re time-constrained during the trading day, you can plan in advance and be logged in ready to trade at these key points.
You can read more about using, reading and interpreting the economic calendar in this article.
A large window of opportunity
The fact that FX trades globally and continuously, from late on a Sunday evening UK time through to the New York close on a Friday night, creates a huge window of opportunity.
Outside of major public holidays, there is almost always something happening in the FX markets. It's just a question of working out what time of the day suits you to trade and looking for the events that could move the markets when you can be active.
Speaking of activity, it's also a good idea to trade the FX pairs and crosses that will be active in the market when you are. The FX majors tend to trade actively around the clock while exotic pairs and crosses may be less active outside of their own timezones, but they can experience larger price moves than the majors as a result.
As we mentioned earlier, we offer our clients access to Smart Trader Tools software that’s specifically designed to enhance and improve your trading experience and free up your time. Among the indicators included in the package are the High-Low indicator and the Pivot tool, both of which are ideally suited to identifying trading opportunities.
The High-Low indicator plots lines, on your MT4 or MT5 charts, that signify specific period high and low points, for example, you could plot the 15 ]-minute high and low in USDJPY or the daily high and low points in EURUSD.
What’s more, because you can run multiple versions of the indicator on the same chart at the same time, you can highlight multiple high and low levels over different time frames say 5, 15 and 30 minutes as examples.
That means that the traders can easily compare the current price action to the points at which the price has previously peaked or bottomed out. Not only that but the High-Low indicator can be set to alert you if any of these critical levels are breached.
Within Smart Trader Tools, there’s also a dedicated Alarm Manager, a powerful tool that can be configured to alert you to any number of events, such as prices changes, account activity and P&L movements, as well as the value of technical indicators such RSI14 or Bollinger bands and these alerts can be sent to you as emails or SMS messages.
The Pivot Indicator also plots lines on charts in MT4 and MT5 but rather than highlighting specific highs and lows in the price, the indicator looks at the previous day's price action to calculate levels around which the price action in the current session may fluctuate. It then draws these on to a chart as support and resistance levels in the form S1, R1, pivot and more.
You can clearly see these points in the daily plot of EURUSD above, and they provide a handy frame of reference for traders, who for example are trying to identify the end one trend the beginning of another or valid entry and exit level for a trade, these levels can also be used to inform your stop loss placement.
Take the next step
We've highlighted just a few ways for you to identify and keep track of trade opportunities, ideas and events, by following these suggestions it should mean that you don't need to spend hours each day poring over charts. Instead, by working smarter and preparing in advance, you can fit trading into your schedule.
Download and check out Autochartist, take the economic calendar for a test drive and contact your account manager at Pepperstone to find out how you can access Smart Trader Tools.
We think you’ll be impressed by the results.