Texas Trading Sessions: Timing Your Forex Strategies

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Texas Trading Sessions: Timing Your Forex Strategies – Premium and discount is a basic principle that can be used when buying anything in the market from consumer goods, all the way to traded securities or even Forex!

The basic idea is that you can buy a product, good, service, or stock on the stock exchange at a premium (above the fair value of what you are buying) or at a discount (buying what is being sold).

Texas Trading Sessions: Timing Your Forex Strategies

Texas Trading Sessions: Timing Your Forex Strategies

As shown in the chart above, the premium and discount can be applied to any item sold or traded in the free market, from gasoline to milk, or even grains of wheat!

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When marking the premium and discount on a candlestick chart, you have the option to mark any price action leg or range on the chart in front of you to determine the premium and discount for a specific range. From there what most traders do is look to use the premium and discount as a convention in their trading, looking to sell at the premium, and buy at the discount.

The truth is, most traders either rely heavily on this tool to make educated trading decisions, or use it in market conditions that make no sense to use the tool. The most common problem with premiums and discounts is that they are low. time frames (15 minutes and less), this tool works a little unless the price is absolutely perfect.

On top of that, some traders may use this concept of premium and discount as a catch instead of doing a deep market analysis using the structure, supply and demand areas, and liquidity to get a sense of the market direction in a more reliable way. and the same way.

Let’s cover the most common pitfalls traders face when using premium and discount. While we think the premium and discount is a great tool to use as a convention, relying too much on it can cause you to both take losses and miss out on setting up quality trades because they aren’t at a premium or discount.

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Similar to using fibonacci retracements, relying too much on premium and discount can hurt your trade, because the truth is that prices don’t always go down because they’re at a premium, or up because they’re at a discount as you noted. up. Price tends to respect a premium and discount over the long term rather than the short to medium term.

The second common pitfall that sellers fall into is using premium and discount in highly volatile and one-way markets. You may have also noticed this in higher time frames when the price starts to go “parabolic”, meaning it moves in one direction with such great momentum that it will not return to a premium or discount before continuing in the same direction.

Premium and Discount are best used in trading ranges where the price converges because this helps us avoid taking potential low trades in the middle of the range where the price may take us out of liquidity.

Texas Trading Sessions: Timing Your Forex Strategies

While we do not mean to avoid trading between long combinations, it is better to focus on playing longs from the discount and shorts from the premium of the full range. This will allow us to capitalize on various price action where most retail traders would stay out.

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If you remember, earlier in this article we mentioned how many traders use the premium and discount concept and tool in negative market conditions, they often use them in large areas where the price does not return to the premium or discount due to a large imbalance between them. buyers and sellers in the market!

We have found that the best place to use the P&D tool is simply in any medium-high period developed on the chart in the form of integration because it will help you avoid taking entries between the ranges where they are. less chance to play.

Besides looking to take short on the premium list and looking to take long on the discount, there is another way this tool can be used, but it should only be used as a convention, and not used alone. It should not prevent you from taking a particular trade, and it should not guarantee the trade itself.

We are talking about using the premium and discount tool to select entry levels, just like you would use the Fibonacci retracement to predict where the price might move and react to the ongoing play.

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In this example, you can see that the price will return to 50% of the building leg, and sometimes it will return to 70% or more. This alone shows that the premium and discount can be highly dependent and the prevailing prices are all relative.

That said, we can use this as a soft join method to select sites that have all of the following characteristics:

So if we only look at the areas or more than 50-70% of the front leg either we are in a bullish market looking for deep demand levels to far from, or in a bearish market as shown above, we are looking for high levels of supply so far. , we can effectively use this device as a filter to stay out of low probability areas that can fail completely.

Texas Trading Sessions: Timing Your Forex Strategies

While the premium and discount is a powerful concept and tool that traders love to use, it is one that we don’t often see traders at Phantom Trading use for a few reasons. Firstly, it depends a lot on how people mark their list, and secondly, it can be very unreliable in situations where the price is pro-trend and runs in one direction with high volatility.

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Knowing this, we recommend only using the premium and discount tool when we are in a clear combination or range over a long period of time in order to help us get out of interesting low points and thus set possible lower trades.

We hope that this article helped you understand the nature of this concept and gave you an insight into how to use the tool in certain market conditions and the conditions where it works best!

Click here to join Phantom Trading and get exclusive access to our global trading community filled with like-minded traders, as well as learn from our team of sponsored traders with 50+ years of trading experience including experienced founders Wyse & Warner and institutional experience. by trading private equity, and our team members have more than $1.5 million in funding through sponsoring firms combined!

Rob is a funded trader from Toronto, Canada, and has been trading currencies, commodities, stocks, and cryptocurrencies for over 7 years. Besides trading, he enjoys making music, boxing, and riding motorcycles. The forex market is generally better than the stock market. Why? The equity market, which is actually a market of many stocks, is governed by the micro-dynamics of certain companies. The forex market, on the other hand, is driven by macroeconomic trends that can sometimes take years to play out.

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These methods show themselves best with major pairs and commodity block currencies. Here we look at these trends, examining where they occur and why they occur. Then we also look at which types of pairs offer the best opportunities for range trading.

There are only four main currency pairs in forex, which makes it easy to follow the market. They are:

It is understandable why the United States, the European Union, and Japan would have the most efficient and liquid currencies in the world, but why the United Kingdom? After all, as of 2020, India has a larger GDP ($2.65 trillion versus $2.63 billion in the United Kingdom), while Russia’s GDP ($1.57 trillion) and Brazil’s GDP ($2.05 trillion) is almost the same as the total economic output of the U.K.

Texas Trading Sessions: Timing Your Forex Strategies

The definition, which applies to most of the forex market, is tradition. The UK was the first economy in the world to develop capital markets and at one time it was the British pound, not the US dollar, that served as the world’s reserve currency. Because of this legacy and because of London’s prominence as the world’s forex trading center, the pound is still considered one of the world’s major currencies.

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The Swiss franc, on the other hand, takes its place among the top four because of Switzerland’s neutrality and fiscal prudence. At one time the Swiss franc was 40% backed by gold, but for many traders in the forex market it is still called “liquid gold”. In times of economic turmoil or recession, traders turn to the Swiss franc as a safe haven.

The biggest pair – in fact, the most liquid currency in the world – is EUR/USD. The pair trades nearly 1 trillion a day in value, from Tokyo to London and New York, 24 hours a day, five days a week. These two currencies represent the two largest economic entities in the world: the US with an annual GDP of 21.43 trillion dollars and the Eurozone with an annual GDP.

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