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Post of the Day: EUR/USD
Tuesday, 14 October 2008 04:44:01 GMT  |  Richard Krivo, Power Course Instructor
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Student’s Question:

Ok, here's a try. The EUR/USD looks totally crazy right now but if I drew the support line right, there's room for it to go lower before it hits the support line. Then should I buy?

Chart 10 13 08

Power Course Instructor’s Response:

In a strong downtrend, such as the one represented here, we would wait for the pair to "stall out", retrace, pullback or consolidate, prior to taking a short (sell) position. A trader can make an approximation as to the retracement level by using Fibonacci Retracement Levels, for example. Once price action stalls and then renews its move to downside (IF it renews its move to the downside), that would be a more prudent way to enter the trade.

If we were to short the pair now, we may be shorting it just prior to a major retracement. By waiting, we avert the likelihood of that occurrence.

Given the trend represented on the Daily chart, we would only be looking for opportunities to short the pair.

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