There are three things you need to consider before entering any trade.
First, you’ll need to consider the trade entry signal. This could be a candle, price or a signal given by the technical indicator you’re using.
Second, you’ll need to consider how long you’ll hold position. This largely depends on the market’s you’re trading. For example, if you’re trading options, it could be 1 minute or more on the IQ Option platform.
Third, you’ll need to consider your trade exit point. This is closely related to the second consideration and also depends on the markets you’re trading. For example, if you’re trading forex, your exit point would be set by your take profit or stop loss.
In this guide, I’ll show you how to trade options by identifying 5 different trade entry signals. Each trade will take into account these considerations.
- 1 How long to hold position and exit points
- 1.1 First trade: Signal is 2 bullish pin bars with lows touching strong support
- 1.2 Second entry point: Price breaks the support
- 1.3 Third entry point: Hammer develops on support and RSI rising
- 1.4 Fourth entry point: Doji forms on support and RSI rising
- 1.5 Fifth entry point: Dragonfly doji forms after solid bearish candle
- 1.6 Summary of the 5 trade entry points
- 1.7 Conclusion
How long to hold position and exit points
Since we’re trading options, the first thing to look at is how long each position will last. I’ll be trading the EUR/USD currency pair. I’ll also use the Japanese candles chart with 5 minute interval candles. Each trade will last 15 minutes.
First trade: Signal is 2 bullish pin bars with lows touching strong support
Using the chart below, I’ve drawn a support line that touches the lows within a ranging market. It’s a strong support because the support touches multiple lows. As the markets start trending (larger candles develop) and two bullish pin bars appear with their low touching the support, I expect the prices to bounce back up.
At this point, I’ll enter a 15 minute buy position (higher). The entry point is at the close of the second bullish pin bar.
Second entry point: Price breaks the support
The price do not continue on an uptrend. This is indicated by the bearish pin bar. But this is not my trade entry point. I waited until the prices finally broker the support. The bearish candles are getting bigger. My trade entry point would be where the price broke the support line. At this point, I entered a 15 minute sell (lower) position.
Third entry point: Hammer develops on support and RSI rising
As the strong down trend becomes exhausted, the markets start ranging again. A bullish candle develops. But since the markets are ranging, I have no idea which direction it will go. The hammer with its low touching the support signals that the prices will go up. This is confirmed by the RSI rising. I therefore entered a 15 minute buy position with the entry point being the price at support.
Fourth entry point: Doji forms on support and RSI rising
Doji candles are hard to trade with since they’re indecision candles. However, to trade them effectively, you’ll need to look at the candles that develop after them. In the instance below, the doji forms at the support level. Immediately after is, a bullish candle develops. I had to wait until the next candle developed in order to enter positions. It was a bullish candle and I entered a 15 minute buy position. Notice that RSI was also rising confirming that prices were going up.
The first trade entry point was signaled by 2 bullish pin bar candles. Both had their lows touching the strong support signaling that prices were about to go up.
The second trade entry was signaled by the price breaking the support and continuing to fall.
The third trade entry was signaled by a hammer candle which indicated prices were going up. This was further confirmed by the rising RSI.
The fourth trade was signaled by a doji that formed along the support. RSI was rising and the next 2 candles were bullish.
The final trade entry was signaled by the dragonfly doji that formed after a bearish candle. RSI divergence occurred at this point so I had to wait until a bullish or bearish candle formed. The bullish candle confirmed that the prices were moving up despite the divergence.
If you’re going to succeed as a trader on IQ Option, you’ll need to master the art of identifying trade entry signals. In most cases, all you’ll need is a keen eye to identify different candle patterns. You’ll also need to learn how to draw support and resistance lines as well as the use of a simple indicator such as RSI.
Now that you’ve learned the different trade entry signals, try them out on your IQ Option practice account. Share your results in the comments section below.
Trade Entry, Trade Entry And Exit, Trade Entry And Exit Points, Trade Entry Checklist, Trade Entry Confirmation, Trade In Entry
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