WHAT IS FOREX?

Page 5

Sideways Market:

Trading a sideways market is also known as range trading. It involves trading a market that is consolidating between obvious support {bottom) and resistance (top) levels {yellow lines). Often resulting in high probability entries with good risk-to-reward ratios, trade signals are given near to these levels where the price is likely to bounce from. Eventually, the market will find its direction and break through one of the key levels. This is displayed on the example below.

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Counter trend trading :

As you are now aware, trends do take 'breathers' and if you are a skilled trader who has the ability to recognise this, then you could quite possibly begin to successfully trade 'countertrend' move. However, this trading methodology is not advised until you have mastered trend trading. Countertrend trading is inherently more risky as at times market manipulation can print many false tops or bottoms before the real ones emerge.

In actuality, many traders are unaware they are countertrend trading price action until they are physically in the trade and managing it. Often the speed of the uptrend can assist traders with determining the profit opportunity and odds for success, as aggressive uptrends often have equally aggressive retracements. Countertrends are short in duration and the performance of the countertrend or retracement move is very dependant upon the chart's technical timeframe.

Traders often become entrapped and lose money when they attempt to accurately trade the countertrend paradigm. For example: buying new lows - also known as bottom fishing. This is where the trader will attempt pick the market bottoms, focusing on getting in at the low of the price action downtrend. This method is extremely risky alongside selling new highs! Traditional trading suggests waiting patiently for confirmation that the underneath support level has held and prices are moving in an uptrend with higher highs and higher lows.