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Selling Rallies and Buying Dips

Selling Rallies and Buying Dips

Richard Krivo, Trading Instructor

Instructor's Response:

Well done and a nice job on employing a 1:2 Risk Reward Ratio on the trade as well.

In a downtrend, waiting for a pullback to resistance and then taking a short position back in the direction of the trend is a higher probability trade.  This trading plan is referred to as "Selling Rallies".  In other words, when a pair rallies up to a resistance level and stalls, at that point a trader can sell the pair back in the direction of the existing downtrend.

In an uptrend the strategy is called "Buying Dips".  When the pair retraces to the downside and stalls at a support level, a trader can then buy the pair as it begins to move back in the direction of existing uptrend.

chart 2 23 10

 

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

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