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Buying on Dips and Selling on Rallies

By Richard Krivo, Trading Instructor
19 May 2010 22:01 GMT

Instructor’s Response:

 
Take a look at the chart below for a visual…
 
You will see that the pair is in an uptrend. Each time that price action retraces (dips down) from its upward move, that is an opportunity to buy the pair. The rationale is that the trader is entering the trade at a better (lower) price as it has come down from a high and also the trader will not have to endure the retracement that would occur if they bought at the high.
 
In a downtrend the reverse would be true and the trader would sell the pair each time it rallied up..."selling on rallies".
 
So, in an uptrend we “buy on dips” and in a downtrend we “sell on rallies”.
 
chart 5 19 10
 

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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19 May 2010 22:01 GMT