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Is there a sure fire, 100% guaranteed winner-every-time system for trading the foreign exchange currency market (FOREX)?
If you answered yes, there are some nice oceanfront building lots at the foot of the Himalayas that you should strongly consider purchasing.
There truly are, however, high probability trading strategies that will result in profits most, but not all of the time.
Here are a few high probability trading tactics.
Trade With the Trend
The reason an uptrend exists is because more traders are anticipating prices to rise. They buy, supply decreases, demand increases, prices go up.
In a downtrend, more traders expect prices to fall. They sell, supply increases, demand decreases, prices go down.
This may sound like an oversimplification, but it is what drives the FOREX market.
How do you go about determining the presence of a trend or the direction of that trend?
You look at price charts of the currency pair or pairs in which you're interested in multiple time frames such as daily, three-hour, 30 minute, five minute and one minute.
Depending on your FOREX trading platform, your preferred time frame may only show you a fraction of the overall price pattern.
Examining multiple time frames eliminates the potential for interpreting what may appear as a solid trend on a short time frame chart incorrectly, with the result being a trade that whip saws back and forth, accomplishing nothing.
Buy Support/Sell Resistance
This is a high probability trading strategy for the extended time periods when markets are not trending, but are moving sideways.
Price charts will identify areas where prices have repeatedly failed to go higher. This is resistance and should be sold.
Conversely, charts will indicate areas where prices are consistently unable to go lower. This is support and should be bought.
Can support and resistance be broken and cause a trade based on them to fail?
The answer is: absolutely.
The point is simply that the probability of support or resistance holding is better than the probability of their being broken.
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