This may seem odd as its an accepted wisdom, but if you try and apply it in your forex trading strategy you will lose money.
If you dont realise why this is - read on and we will explain why.
Of course, the aim of all traders is to buy in at the bottom of trends and sell out at peaks but its impossible to do and the way most forex traders do it means they lose.
The key to understanding why you cant do it, is to realize that you have to predict in advance where prices will go or buy into a low or sell into a high and hope the levels hold.
Fact is you cant predict where forex prices are likely to go and if you rely on hope then you shouldnt be trading forex.
What you have to do is not predict but get confirmation of price momentum changes, above the level of support - BEFORE executing your forex trading signals.
A simple example will show you how to do this.
Many Forex traders watch a support level such as, Fibonacci level, pivot point etc, and as prices come to perceived support; they simply buy into it just above the level.
There logic is, they are in at a low if the level holds of course the important word here is if.
Support lines, Fibonacci levels, pivot points break frequently, so if you try and buy into them just hoping they will hold you will buy the low will see you lose.
A better way to trade:
Is to use price momentum to check that support and resistance will hold - and then trade on confirmation.
Trading on confirmation gets the odds on your side trying to predict will see you lose its as simple as that.
So how do spot changes in price momentum?
Great indicators to use are the stochastic and relative Strength Index (RSI)
You simply watch for prices to move to support and then turn up supported by RSI or stochastic.
You wont buy the bottom you will miss a good bit of the move, but by trading in this way you will get stopped out less and always trade with the odds this means bigger forex profits longer term.
Buy low sell high is an accepted investment and many traders accept it at face value trade and lose.
Over 90% of forex traders lose and buying low selling high without confirmation will see you join them, dont fall into this trap.
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