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Post of the Day: Bollinger Bands
Wednesday, 14 January 2009 04:30:08 GMT  |  Richard Krivo, Power Course Instructor
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Student’s Question:

In the chart below I've decided to go long on AUD/USD. Todays candle wick is just penetration the lower bollinger band. I will wait to see if tomorrows candle confirms the reversal and moves up. I'll place a stop just below the bottom of today’s wick.

chart 1 13 09 A

Power Course Instructor’s Response:

While I can see your rationale, keep in mind that the primary tool in determining the direction to take a trade is the overall trend on the Daily chart.

Taking a look at the Daily chart below, the prevailing trend is still to the downside. There has been a strong retracement recently but that trendline has been broken.

While what you indicate could occur, at this point, the higher probability trades will be opportunities to short the pair.

chart 1 13 09 B

 

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