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Monday, November 8, 2010

Forex Trading Strategy - An Easy to Learn Method

If you want a Forex trading strategy which can make you big gains, in just 30 minutes a day then, you will love the method enclosed which is also very easy to understand and can be learned quickly. Let's take a look at the Forex trading method in more detail...
If you look at any currency chart, you will see short term price spikes which are caused when greed pushes prices to far to the upside or fear, pushes prices to far to the downside. These price spikes from fair value never last long and prices soon come back to more realistic value from these overbought or oversold levels. The aim of the Forex trading strategy we will look at here is to, sell into greed and buy into fear and make quick profits. This method is known as Forex swing trading.Let's look at a simple Forex swing trading strategy which makes big gains and in our example, we will look at selling into greed in a bull market but of course, the same logic will work in a bear market when prices are oversold.
  • Watch for an accelerated up trend and a short sharp price spike - as soon as it occurs, look to see how overbought the market is.
  • To find out how overbought the market is use some momentum oscillators which will show you how overbought the market is and the best ones in my view are - the MACD, the RSI and the stochastic. These indicators are all easy to learn and will allow you to see how overbought the currency is.
  • You then need to wait until momentum diverges from price and you want a set up where the price is still rising and momentum is falling - this is known as divergence and warns that the price is about to turn. When divergence occurs, execute your trading signal and go short and place a stop above nearby resistance.
  • Set a downside target where you want to take profit and this should be above the support level you expect prices to pull back too. Never wait for support to be tested in case prices turn back up and eat your profit. Set your target and get out the market and wait for the next signal.
  • Always keep in mind, the more overbought the market is and the steeper the price rise, the bigger the fall, so only trade markets which are at extremes.

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