Zone trading refers to a trading style where traders identify,mark and use a price level for trade entries and exits.It gives a trader overview of where they can enter,what will be there stop loss and what is there possible target.We call this as “SET”.SET stands for stop loss,entry and target.
Zone trading provides stop loss,entry and target
As said earlier,SET is the most important factor of any trades or investment decision.You don’t have to like other losing trader who don’t identify SET before taking a trade.If you have identified SET before a trade,you can gather possible risk reward ratio.Best risk reward ratio is 1:3 or higher.
With just 30 % accuracy and 1:3 risk reward setups,you only need 3 successful trades out of 10 to be in overall profit.This is why trading in zones is much useful to traders than nakedly trading a financial security without zones.
Zone identification in price charts
You just need two horizontal lines to mark a zone.But what is a zone exactly?
A zone is an price area where possibility of high imbalance between buyers and sellers could be seen.This can be an institutional order quantity area or a support level or resistance level.When you look at chart,you should think about what major market participants will be thinking at a particular price zone.
Take a look at below chart.We can clearly see that current market prices are very high.Continues buying has happened in past few days.There is a previous resistance zone in place.So chances of profit booking and fresh short selling are high at this marked level.
Buyers who bought it for swing trade should look to book profits at current level or use a trail stop loss method to preserve there profits.Sellers should look for this zone to be respected or get a false breakout entry to go short.
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Do you know how to trade in zones?? You can identify buying and selling zones for stocks or any other trading instrument and time your entry like professionals.
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Learn how to swing trade like professional traders.Understand various risk involved in swing trading like gap risk and the best way to reduce your risk.
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