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In a Downtrend, Sell a Rally

In a Downtrend, Sell a Rally

Richard Krivo, Trading Instructor

Instructor's Response:

Nice nailed it!

This USDJPY pair is in a downtrend on the daily chart. So, the higher probability entry would be to wait for the pair to trade up to a resistance level (sell on a rally up to resistance) and then open a short position back in the direction of the trend with a stop above the resistance line.

Good work...

As a side note, in an uptrend we would do the opposite.  We would wait for the pair to pullback to a support level (buy on a dip down to support) and then open a long position back in the direction of the trend with a stop below the support line.

chart 12 22 09

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.