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Video: Correction or Reversal, Trading the Dollar Stumble

Video: Correction or Reversal, Trading the Dollar Stumble

2015-02-03 22:16:00
John Kicklighter, Chief Strategist
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Talking Points:

• Corrections are a necessity in normally functioning markets, but trading them can be difficult

• Conservative traders wait for pullbacks to mature to reenter with trend, the aggressive trade both ways

• We discuss how to approach this transitional view of the market using the US Dollar as our example

Want to develop a more in-depth knowledge on the market and strategies? Check out the DailyFX Trading Guides we have produced on a range of topics.

Markets don't move in straight lines. Corrections and reversals are inevitable in normally functioning markets. With that said though, how do we trade a market which is in a brief respite from a larger trend versus one that is tipping into a lasting reversal? What do we do when we aren't certain? The Dollar is a good illustration of this trading question with a pullback this past session that has put pressure on a seven-month USDollar trend and forced a high profile break on EURUSD. There are two approaches to this view: conservative and aggressive. For the conservative, patience until the correction has played out or confirmation of a genuine turn is observed (determined by technicals and fundamentals) is key. Those that are more aggressive, will look for the appropriate tech levels and need to chose a pair that leverages the most important fundamental themes to take advantage of the pullback or trend. We discuss trading in these transitional conditions in today's Strategy Video.

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