When a trend has started how do you get in? There are always plenty of opportunities as trends can last for months or years.
Here we will outline a simple method on a live example.
Lets look at it
If you read our recent article you will know that we wanted to get into US Dollar and Canadian Dollar and this set up has just come to fruition.
Here it is:
You can see it on any many chart services but the one we are using here is futuresource.com and were writing this on 06 03 PM CET.
Pull up the weekly chart and you will see the long term trend in US Dollar is down and you want to be in on the longer term trend
Now pull up the daily chart.
You will see the US Dollar is having a counter trend rally.
Last week we said that resistance and nearby highs would probably hold.
Check out the strong resistance and the top of the Bollinger band.
This is the line the US Dollar had to cross and it hasnt and is faltering just below this level.
Get Confirmation
Rather than just jump in and trade, we look for a test and a fall off in near term price momentum.
If you want to time trade entries the stochastic momentum indicator is simply one of the best timing tools you will find.
It measures short term velocity of price and is a great timing tool and confirms weakening momentum.
The key here is to watch resistance and then wait for prices momentum to the upside to stall.
All you do is simply watch for the stochastic lines to cross and point downwards with bearish divergence which has just occurred.
It really is that simple.
Identify strong resistance look for a strong rally into it and WAIT for confirmation of weakening of momentum. Dont jump too soon
The real key is to get confirmation of weakening momentum in the counter trend rally and thats where the stochastic is so useful.
Many traders simply jump in near resistance and expect it to hold but this means you reduce the odds of being successful and support and resistance levels are broken all the time.
Right or wrong
This is a trade with low risk and good rewards and you can run it or simply wait for a quick blast to the middle of the Bollinger band.
Look it up on the net or read our other articles, its an under rated yet very useful tool
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