Say Ed,
What can be done with this pair? Or any of the multitudes of others for that matter that are at critical highs? Buy on the rallies?
So many of the pairs are at new highs it really throws a newbie trader like myself. The USD/CAD pair is certainly trending down, but is it worth it at this stage to look to keep shorting and just treat days like today as a minor retracement? It looks like it's trying in earnest to bottom out, but I got no game for this context. As a green trader all this sort of situation does is make me want to sit on my hands, I'd like the opine of experience.
Appreciate any feedback Ed, 'cause this phenomena is board wide and I'm weary of missing out every day. Strategies?
Thnx in advance
Hi Technocrat,
Great question. When the market is trending, we have a choice - trade the breakout, or wait for the pullback. I prefer to trade the pullbacks, because there are simply too many false breakouts, not just in Forex but in all forms of trading. If I were trading stocks, I'd like to use a William O'Neil style of buying breakouts on high volume, but of course we don't have readily available volume figures in the currency markets.
Since so many breakouts fail, I try to use them to my advantage in certain situations - for example, under the right conditions I'll fade a breakout that runs counter to a dominant trend. This is because failure for such a breakout is extremely common, and it also allows the trader to enter in the direction of the dominant trend. But on the whole, I'd rather wait for the pullback then enter on the breakout. This allows me to trade with the dominant trend without entering at extreme levels. Hope this helps!
Ed
