Welcome forex traders! Are you tired of missing profitable opportunities? Do you struggle to identify the right entry and exit points? This blog post will equip you with powerful market timing techniques using the concepts of “premium” and “discount.”
This strategy, derived from institutional trading and smart money concepts, can significantly enhance your forex trading experience.
Understanding Premium and Discount
Imagine a market range with a high and a low point. The area in between represents a “balance zone.” This zone can be further divided by using the Fibonacci retracement tool.
Premium:
The region above the 50% retracement level is considered “premium.” This signifies a potential selling opportunity.
Discount:
A “discount” is a region below the 50% retracement level. This suggests that there might be a purchasing opportunity.
Trading with Market Sessions
The foreign exchange market operates without a break, but not all sessions are equal and depend on different time zones. Here’s a breakdown of important trading sessions:
- New York trading comes alive between (8 am and 5 pm) Eastern time. That’s when things get busy for traders because there’s a lot of activity and prices can swing back and forth more dramatically.
- Typically, the Tokyo Session (12:00 AM to 9:00 AM EST) sees market steadiness but also presents opportunities for trend continuation bets.
- London Session (3 AM to 12 PM EST) is a mix of volume and volatility.
Integrating Analysis Techniques
Let’s now integrate session analysis with the premium/discount ideas to find high-probability trades. Here’s a methodical approach:
- Identify the Market Range: Find the most recent high and low for a currency pair.
- Draw the Fibonacci retracement: Use the Fibonacci retracement tool between the high and the low positions.
- Analyze Market Context: Look at the prevalent trend over a longer timescale (for example, a daily chart).
- Look for Session Overlap: Identify areas where sessions overlap, as they often experience increased volatility.
- Identify Premium/Discount Zones: Define the “premium” and “discount” zones based on the retracement level.
- Take Your Position: Look for price action during your preferred trading session to enter trades within the premium/discount zones.
- Buy-in Discount: If the price falls into the “discount” zone during your session, consider a long (buy) position.
- Sell in Premium: If the price reaches the “premium” zone during your session, consider a short (sell) position.
Things to Remember:
- Market analysis is crucial: Don’t rely solely on premium/discount zones. Consider other technical indicators and fundamental factors.
- Volatility is your friend: Look for entries during periods of higher volume and volatility, often coinciding with session overlaps.
- Risk management is the key: Always use stop-loss orders and other proven risk management strategies.
If you stay focused on these paramount, there will be high chances to recognize high-probability trading chances and make wise choices in the forex market.
Conclusion:
Now as you are ready to take your forex trading to the next level, consider exploring credible prop trading firms like Forex Prop Firm as they can provide funded accounts, allowing you to trade with real capital while honing your skills.
