Aggressive Entries using Pending Orders

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Video Transcription:

Hello, traders. Welcome to the Price Action course and the seventh module, trade management. In this lesson I’m going to teach you all about aggressive entries and how to use pending orders and hot spots to trade while you’re away from your monitors.

Some of you might think, “I don’t want to trade while I’m away from my monitors. I want to be in control of my trades. I want to be looking at every single tick.” And that’s where you’re wrong, guys. Using aggressive entries or pending orders at hot spots is going to teach you how to be very patient for price to hit your entry zone. And it’s going to give you a lot more confidence in your system and in your price action reading and analyzing. So without further ado, let’s start with this lesson.

Pending Orders

Aggressive entries are a great tool for vast traders to use in situations where you are going to be away from your monitor or if you want to get a better risk to reward ratio on your position. Now let’s start with trading while you’re away from your monitors. This might sound a little tricky and somewhat dangerous because lots of you like to be in front of your monitors watching every single tick when you are in a trade. This is not a good practice because what you need to understand or what you’re aiming to do is to let your trades hit your profit target levels or your stop-loss levels. Watching every single tick is not a good practice because it’s going to inflate your emotions and you’re going to get inside your own head and you might decide to take out your trade disregarding completely the trade plan that you had when you took it.

Using pending orders is going to allow you to be more truthful and to have more confidence in your abilities as a price action trader. Of course you are going to get better risk to reward on your positions because we are going to put those limit orders right at the entry spots that we want. We are going to get the best possible entry while using them and of course you can use these positions while you are still in front of your computer. Sometimes you are going to be taking manual positions from manual entries and sometimes you’re going to be using limit orders to take your positions.

Using limit orders is truly an art form for price action traders because we are going to use them where price is likely to reverse and this is key. We are only going to use them when we are at key levels of supply or demand. This means that we are going to have to only use the very strongest areas of supply and demand. This is key: we are not going to be using poorer demand zones that we found or that were tested in the one hour charts, fifty minute charts, five minute charts, or even the forward charts sometimes. We are going to use the dated charts, support and resistance levels, and of course the four hour chart because they are the strongest. At those areas is where we are likely to find very big buyers or sellers that will make price reverse or stop and reverse.

Because these aggressive entries are not taken with confirmation but only based on our overall market structure analysis, we are going to use less risk when trading with them. You can use them in your system as starter positions, meaning that you can have a limit order very strong demand level and when it gets filled, you have a starter position, meaning that with this limit order you are risking much less than what you normally risk with a manual order. When you get confirmation that price has reversed you can add to that position and have a complete order on your hands.

The great thing about pending orders is that they will allow you to take positions while not in front of your monitors. Sometimes we miss positions because we are not or we can’t be in front of our monitors every single minute of the day. Take my example. I wake up at four o’clock in the morning, which is already past noon in London so sometimes I do miss some very good entries at the London opening. But when I use limit orders, sometimes I get filled while on my sleep time and when I wake up the market has already reversed and I am in a winning position thanks to this very cool strategy.

We will only use pending orders for reversal trades and not breakouts. The reason is that the environment behind reversals is less risky than a breakout in terms of volatility. This is very important and I need you to focus on this last numeral.

The reason that we are not going to use pending orders in breakouts is because of the volatility behind it. Let me put this in simple words. When price hits a very strong area of resistance, it is very unlikely that we are going to have big spikes to the upside and big spikes to the downside and then a candle with huge wicks to the upside and downside and a very big body, meaning that there was a lot of volume at that level because when price hits those levels… let’s imagine an uptrend where price is in an uptrend and hits that level of resistance, the momentum of the uptrend is already fading out because the long positions that were riding it are already taking profit.

When we hit this level of resistance, buyers come into the market and make price go down without too much volatility involved. In the case of a breakout where price breaks out of a triangle for example or breaks below an area of support or above an area of resistance, there will be momentum because of momentum traders and there will be big spikes, and we don’t want to be not in front of our monitors and in a trade while the market is very volatile. So we are just going to take these entry orders at support and resistance levels where we will have reversals with low volatility.

Pending Orders 2

Now, let’s go through a chart and I’m going to teach you how to do this. Let’s go through a GBPUSD chart and let’s look at what we have here. This is a one hour chart. Let’s go to the four hour chart, and because lots of you use MT4 as your trading platform, I’m using the MT4 to teach you this lesson.

The first thing you need to do is maybe go to the daily chart and look for a strong area of resistance. If you go to the four hour chart, you can see that we have this as a very strong resistance zone. Okay? Let’s move this rectangle all the way up here. Okay? And you can see that this is the area of resistance that we are looking at. Maybe not that big but this big. Okay? When price hits… you can see that price is actually in an uptrend. We are making higher highs and we are making higher lows. Okay? Here’s the first low, the second low, and the higher low than we just made right here.

This is why I have this position, where price tested these previous highs and then we moved the stop-loss below the next low. Now, if we were not in this position, let’s say that we are just waiting for a price to hit this area and to reverse.

What we are going to do is firstly we are going to always get in a few pips below the area of resistance and a few pips above the area of resistance because we want to get filled. You can see that here we have what seems to be like a 53 pip stop-loss, which is fine as a stop-loss, and… actually, we do have a much, much higher stop-loss because the actual area of resistance is this one right here. Because we want to take into consideration these two lows that tested these areas and of course we broke to the downside, we tested this area of support, then we tested these old lows as resistance before we broke down. So the actual area is this one and if we want to get filled we would have an 80 pip stop-loss, which looks even better because I think the 50 pips on the reversal trade would have been too tight of a stop-loss.

Entering Limit Orders on MT4 Platform

What we’re going to do is we are going to click a new order here and what we’re going to do is we’re going to choose a pending order and then a sell limit. A sell limit is an order that is going to be triggered once price hits it and is going to take us on a sell-trade. The actual area that we’re going to get filled at is 54-94. That’s 54-94 for our pending order which is a sell limit and 154-94 and we want to place it. So we have placed our limit but we also want to have in place a stop-loss order with our limit order if price breaks with this level of resistance. Okay? So, our stop-loss would have to be around the 55-74 level and to do so you would just go to your terminal and double click on stop-loss and you go at 55-75 and you click on modify and now you have your stop-loss, and you can of course move it if you want to.

There you go. That’s our limit order, ready to be filled when price hits this level. Okay? If you want further confirmation of the levels that you are playing, you can use a Fibonacci retracement level and you can see that we are between the 61-8 and 76-4, but because we are just using price action for our entries, we are just going to use levels of supply or demand. And this is how you’re going to do it. Okay?

The first thing we need to do or we need to analyze is where our targets are going to be. Once we get filled on this short position, I think that because we are risking 76 pips, we are going to take targets at this very low right here, which is also a very strong area of previously tested resistance and I got filled. We are going to take profit at 53-52, and we are just using price action as our entry area, our stop-loss order, and our limit order, which is our take profit order.

As you can see this is how you are going to be trading it and how you are going to use aggressive orders to trade these markets. Remember, you’re not going to be using aggressive orders every single time that you are about to hit a level of support or resistance. You are going to use limit orders only on the strongest areas of support and the strongest areas of resistance. Remember that you might get filled and immediately taken out, so you might want to use smaller positions for these entries.

Adam

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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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