Uptrend Trading FOREX Strategy: BUY AT DIP BOTTOMS – GET PROFITS!
As with all strategies it is how you manage it that counts. A strategy that works in upward trending markets is buying on the dips at the bottoms. What we mean by this is that nothing goes straight up; often times you will see a stock or position go up and then start to recycle, with a reverse or FOREX profit taking.
If the position is going up nicely and you are looking at a price chart you will see the bars (up-ticks) continue to move upwards. If you see the price chart all of a sudden start to move in the downward range you have a change in direction. If we say that this is a daily price chart then each one of the bars black or white represent a day's worth of trading activity.
Often times when you see a position moving sideways and it is at the bottom of the screen the position is looking for direction. Usually the position will go up from here. Consolidation of moving sideways is just that. The overall direction of the bars or daily price is really not going up or down but just kind of sitting there in a range. A range is when the position is say going up to $12 dollars and down to $10 dollars but no further away up or down from those prices.
Uptrend Trading FOREX Strategy
When you see the consolidation happening at the top of the chart it is usually looking for direction and is often times overbought and will move in a downward direction. Overbought is when you have too many buyers and no sellers. Now there is no more room for it to go up and no one is selling. A shift will usually take place in the direction as FOREX profit taking will kick in.
Profiting from FOREX is just that investors start taking their FOREX profits because the position has gone up nicely over a period of time say daily, weekly, monthly, or yearly. That drives the price up until it hits resistance. Often time’s investors miss the first opportunity to get in on the position when it takes off from its consolidation period.
Uptrend Trading FOREX Strategy
So you have the first run up and profit taking kicks in. The buyers start selling and the sellers start to outweigh the buyers and the position starts to go down. If it is just normal profit taking the position will go down looking for some support. The support is simply where the buyers think there is a good deal and start buying again. All of a sudden you have more buying than selling and the position starts to go up again; at this point you will see the chart start to move back in a positive direction. It is at this time a dip has occurred and you have an additional opportunity to buy back in.
There really are no opportunities to get back in as there are no definable dips in the price. And if you look at the top just to the left you will see that as the position seems to have hit some resistance it starts to consolidate a bit. The price moves sideways. Some investors will see this as a small dip in price and an opportunity to get in the position. What usually happens is that the position will move up slightly and then correct a bit before going back up.
Uptrend Trading FOREX Strategy
The difference between profit taking and correction is that profit taking is usually only for a brief period and the position will move down toward its near term support (not very far from its last high). A correction is where the position has run up pretty strong and then turned around. Significantly not enough to change the overall direction of the trend but enough to give back a large portion of your profits. This is one reason that we really talk about money management. Good money management will protect your downside when the position goes into a correction. A correction can be classified as a percentage of the last move up to what it can be expected to go down. So if the position goes up say 10 dollars and then goes back down 5 dollars before going back up again you would have had a 50 % retracement.
So buying on dips gives an investor numerous opportunities to add to their positions or get in on the trade to start profiting from FOREX |
