News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bullish
Oil - US Crude
Bullish
Wall Street
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bullish
USD/JPY
Bearish
More View more
Real Time News
  • Forex liquidity makes it easy for traders to sell and buy currencies without delay, and also creates tight spreads for favorable quotes. Low costs and large scope to various markets make it the most frequently traded market in the world. Learn more here: https://t.co/5uSWKoLkd6 https://t.co/boEI8RuQdC
  • The growth-linked New Zealand Dollar may rise on the upcoming #RBNZ rate decision following rosy economic data. However, downside potential in the S&P 500 could offset $NZDUSD gains. Get your #currencies update from @ddubrovskyFX here: https://t.co/LfCe6C6G3P https://t.co/kUeBxxeaEf
  • It was a quiet week in Aussie as $AUDUSD put in its second consecutive week of indecision. But taking a more granular look highlights the potential for a reversal scenario. Get your #currencies update from @JStanleyFX here: https://t.co/PPK20nubAf https://t.co/0nfmRRFNnz
  • The S&P 500 pushed the market's comfort with a head-and-shoulders pattern through Friday's close. What should we look for in technical patterns, overlapping fundamental tides and speculative positioning for the likes of $EURUSD next week? https://www.dailyfx.com/forex/video/daily_news_report/2020/09/19/EURUSD-Pressure-Building-while-Anxious-Traders-Weigh-Did-SP-500-Break.html?ref-author=Kicklighter&QPID=917719&CHID=9 https://t.co/lgVJVwi8th
  • Sterling remains trapped by overarching fundamentals drivers and both $GBPUSD and $EURGBP are going to have to wait until the Brexit dust settles. Get your #currencies update from @nickcawley1 here: https://t.co/vF1K1cy0nd https://t.co/NSA7qiQihc
  • Key levels in forex tend to draw attention to traders in the market. These are psychological prices which tie into the human psyche and way of thinking. Learn about psychological levels here:https://t.co/1oygcFMFNs https://t.co/d9EmTOHyTv
  • Traders tend to overcomplicate things when they’re starting out in the forex market. This fact is unfortunate but undeniably true.Simplify your trading strategy with these four indicators here:https://t.co/A4dqGMPylo https://t.co/xqbUxwWgTZ
  • An economic calendar is a resource that allows traders to learn about important economic information scheduled to be released. Stay up to date on the most important global economic data here: https://t.co/JdvW6HNuqV https://t.co/Gi8LHCT5sB
  • The AB=CD pattern is simple once you know how to spot it and draw the proper Fibonacci retracements. Make your trading strategy as simple as ABCD here: https://t.co/AKmlmaAZBS https://t.co/FFmRYyx4ou
  • There is a great debate about which type of analysis is better for a trader. Is it better to be a fundamental trader or a technical trader? Find out here: https://t.co/aVAzFypAg1 https://t.co/r7aJb4qpqc
Stick with a Trade in a Strong Trend

Stick with a Trade in a Strong Trend

2011-07-07 22:00:00
Richard Krivo, Trading Instructor
Share:

An excellent question was posed in today’s LIVE webinar session regarding the Strong/Weak Analysis.

(For those of you not familiar with how to go about doing a Strong/Weak currency analysis and the merits of doing so, click HERE for additional information.)

Let’s set up a little background before answering the question…

The idea behind doing a Strong/Weak analysis is to identify the currencies that, when matched up, have a greater likelihood of producing a successful trade.

For example, at the present time the GBP is very weak and the NZD is quite strong. Knowing that, a trader would go to a chart on the pair to see what price action looks like in an effort to identify a potential entry.

Here is a recent 4 hour chart on the pair…

Stick_with_a_Trade_in_a_Strong_Trend_body_chart_7_7_11.png, Stick with a Trade in a Strong Trend

As can be seen, the dominant trend on the pair is clearly to the downside. The GBP has been weaker for longer periods of time than the NZD has been strong. However, there have been periods of time (see the black arrows) where the NZD has been stronger than the GBP. And that is why we see a bullish retracement around those black arrows.

Given that background, here is the question that was asked today that prompted this Post.

“If we entered a trade when one currency was strong and the other was weak, should we close the trade when the strong currency becomes weak and vice versa.”

Great question…and the answer is no.

The reason that a trader would not exit can be seen on the chart. Even though the downtrend is quite strong, periodic retracements are to be expected. And even though these retracements take place, they by no means indicate that the trend has come to an end.

As such, when in a strong trend it is advisable to stay with the trade through the temporary retracements that will occur as the GBP strengthens against the NZD.

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

DISCLOSURES