HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
XM information and reviews
XM
86%
NordFX information and reviews
NordFX
86%

The Complexities and Nuances of Touch Trading: A Comprehensive Analysis


Feng Zhou   Written by Feng Zhou

Touch trading, a strategy employed in the volatile world of forex trading, is a sophisticated approach that requires traders to enter the market at a precise intersection of live price impact with a predetermined price level, typically a horizontal support or resistance. This strategy, while offering unique advantages, also presents notable challenges. Its effectiveness hinges on a trader's ability to swiftly adapt to market movements and accurately anticipate market reactions at critical points. Below, we delve into the details of touch trading, examining its mechanics, advantages, and potential risks.

Definition and Mechanics of Touch Trading

Touch trading is characterized by its emphasis on quick adjustments in response to market fluctuations. This approach is rooted in the trader's ability to predict market reactions at key interest points, allowing for prompt exits to mitigate losses when initial analyses fall short. This strategy often involves using floating stop-loss orders or tight fixed placements, banking on the market's quick reversal from significant support levels. Employing a tighter stop-loss can enhance the risk-to-reward ratio, and early entry at the source point potentially amplifies profit growth.

In contrast, more traditional price action trading methods typically require broader stop-loss placements, as entries further from the point of origin must account for the possibility of benign pullbacks against the anticipated trend.

Despite the allure of increased trading opportunities and potential for greater profits, it’s crucial to scrutinize the drawbacks of touch trading. We outline three key considerations for traders contemplating this strategy.

The Role of Support and Resistance in Touch Trading

Support and resistance levels are crucial in touch trading, as they form the foundation of this method. A position is typically entered when the opening price action hits or touches a predefined point, such as a support or resistance level.

Advantages of Touch Trading

Challenges and Risks of Touch Trading

The Complexities and Nuances of Touch Trading: A Comprehensive Analysis

Who Should Consider Touch Trading?

Touch trading is best suited for traders with extensive experience and emotional resilience. It is ideal for those who are comfortable with both winning and losing and can recover quickly from losses. Traders using leverage must ensure sufficient margin to protect their trades from margin stop-outs.

Alternatives to Touch Trading

A viable alternative to touch trading, breakout trading involves using indicators to predict price range breakouts through support or resistance levels. With the right mix of indicators, traders can estimate the length of the breakout trend. This strategy typically carries less risk and offers a more generous margin for error.

In conclusion, touch trading is a complex and demanding strategy, suitable for experienced traders who can adeptly navigate its inherent risks and challenges. It requires a profound understanding of market dynamics, swift decision-making, and emotional fortitude. As with any trading strategy, it’s crucial to thoroughly understand its nuances before implementation, ensuring alignment with one’s trading style and risk tolerance.


RELATED

What Is Shiba Inu Coin?

Shiba Inu coin is a “meme coin” that caught the attention of crypto enthusiasts over the last few years. The coin is one of the largest of the "dog coins" and a direct competitor to Dogecoin...

FBS: Trading Cryptocurrencies on MetaTrader 5

Millions of traders all over the world use the MetaTrader 5 trading platform to trade Forex, stocks, and futures. Over time, it has become popular among cryptocurrency trading enthusiasts as well...

A concise guide on investing in Ripple CFDs

Before the advent of digital currencies, man has been using paper or fiat currencies which are controlled by governments or central banks, restricted by location...

The Importance of Having a Forex Trading Plan

When approaching a field like forex trading where personal decisions translate into profits or losses, having a well-outlined and easy-to-follow plan can make the difference between success and failure...

Leveraged ETFs: Worth It or Not?

Leveraged Exchange-Traded Funds or leveraged ETFs aren't new to individuals or institutional investors. In fact, they're becoming one of the most popular types...

All About Cardano: A Crash Course

Cardano has been one of the best attempts to solve two problems that BTC fails to achieve: scalability and network scalability. But are good intentions...

Unlocking the Potential of Asset-Backed Cryptocurrencies: An In-Depth Exploration

Imagine blending age-old investment wisdom with the groundbreaking digital currency sphere. The infusion of the US dollar into blockchain technology, or endowing cryptocurrencies...

Can you make money with crypto arbitrage?

Crypto arbitrage is the practice of and methodology behind taking advantage of price fluctuations in the price of various cryptocurrencies, such as Bitcoin or Ethereum. These variances...

Margin Call: What It Is & How to Avoid It

You have probably heard about an unpleasant surprise to traders: a margin call. And we hope you do not know how bad it might be for your money. A margin call is a broker’s demand...

Oscillating Indicators

As their name suggests, oscillating indicators are indicators that move back and forth as prices rise and fall. Oscillating indicators can help you decide how strong...

Trading GBP vs Euro Characteristics

After almost two decades of forex history, the GBP vs Euro pair is today one of the important major currency pairs in online trading. Both the Euro...

Cyber Monday and the Stock Markets: Friends or Enemies?

The first Monday coming after Thanksgiving is called Cyber Monday and it is very similar to Black Friday only that the former mainly occurs online. Cyber Monday...

Quantitative Tightening: What Is It And How Does It Work?

During the pandemic alone, the U.S. Federal Reserve bought a whopping $3.3 trillion in Treasury bonds and $1.3 trillion in mortgage-backed securities to lower borrowing costs...

Navigating the Exciting Challenge of Trading Over 150 Stocks with ModMount

ModMount presents traders with the exhilarating opportunity to dive into one of the largest and most dynamic online markets – the stock market. This platform challenges traders, whether novice or seasoned...

Top NFT Coins

It cannot be that you have never heard of NFTs. Artists sell their paintings in NFT format, musicians release NFT albums, and even Banksy's work "Morons (White)"...

Coronavirus pandemic: Three scenarios on the global markets

Markets require central banks to take regulatory responses, and after the chaos that occurred last week, the expectation of such measures was quickly taken...

MetaTrader 4. Advanced Features

As people are becoming more dependent on electronic devices, many forex brokers now offer applications to support MT4 on mobile devices. The functionality of the MT4 application is similar to that of the desktop version...

Forex Carry Trading: A Comprehensive Guide for 2023

As the echoes of the 2008 financial crisis still resonate, the world is now grappling with a new economic challenge: swift inflation. This inflation surge has brought the carry trade back into the limelight...

How To Cut Losses Trading Cryptocurrencies

Even good trading and investment strategies can lead to portfolio losses if the basic rules of money management are neglected. In addition to the basic rules typical for investing...

Short selling as a way to profit

Short selling is a method of stock trading that allows investors to profit from an investment vehicle that is going down in value and that they do not own...

Vantage information and reviews
Vantage
85%
FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.