Today we will discuss how we can make this decision based on
using the trend and momentum analysis. Let's start with the example of this
week, the AUD / USD.
If the scalper opt for a pair for trading, they must first
take a strong market trend seen. Below we see the AUD / USD crashes and falls
short by over 1054 pips. Currently, the couple is at a new low for the month,
9527th As the market continues recorded lower lows, this is an opportunity for
short scalpers to apply their time trading strategies.
Learn Forex -AUD/USD daily chart
(Created Using FXCM Marketscope 2.0 charts)
The next step should be to identify the short-term market momentum.
This step is necessary to prevent moments at which the currency pair goes
against his primary trend. In order to identify an ideal trading scenario,
traders should look for in a downtrend on a series of lower lows and lower
highs over the course of at least a full week of trading. This can be found out
with the method outlined below.
The blocking method for the identification of short-term
momentum is used to halve the trading week to ensure that the short-term
momentum corresponds to a longer trend. We see the AUD / USD is blocked down by
the previous Wednesdays and Sundays are identified on our chart. It is
important in this analysis to identify a currency pair recorded the lower lows
and lower highs, which corresponds to our downtrend. If the price exceeds the
previous high, which in, 9695 is currently, traders would realize that the
short-term momentum is at a turning point and look for another opportunity for
trading.
Learn Forex -AUD/USD Building Blocks
(Created Using FXCM Marketscope 2.0 charts)
Now that both the trend as well as the momentum were
identified, traders can apply the scalping strategy of their choice. It is
important to remember that although this analysis has examined a pair for
trading, but the trend may reverse anytime.
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