Generally we will buy an item if it's cheap and sell it when the price has been high. If you know the price of the goods you would buy today tomorrow will come down, then you certainly will wait until tomorrow to buy it. Similarly if you know the price of the goods that you will sell tomorrow will be higher, it doesn't hurt You to wait until tomorrow.
In trading, either in the market forex, stocks, commodities or futures, traders always try to buy at the price it is estimated most low and sell at a price that is estimated to be the highest. The term is often referred to with the buy the dip, sell the rally. This article will discuss how to determine momentum or the right time to buy at the lowest price or sell at the highest price.
If you do not know will buy the dip or sell the rally, following 3 stages to do so:
1. Determine the direction of trend
2. Choose oscillator indicator
3. Filter the signal in accordance with the direction of the trend is going on
Determine the direction of trend
When the market price moves in the direction of an uptrend or downtrend, there are points of swing (swing points) which is the reference point for identifying the direction of the trend. The most basic way to determine a trend is to look at the pattern formed by the point-point swing.
For an uptrend points swing will form a pattern of higher high or high level which is higher than previous levels high and higher low or low level which is higher than the low level before. Downtrend for swing points will form a pattern of lower high or high level that is lower than previous level high and lower low or low level that is lower than the previous low level.
Choose an indicator of oscillator
Oscillator indicators be used to know the overbought level (saturated buy) and oversold (saturated selling). At these levels it is possible the price will experience a correction. Oscillator indicators are often used is RSI, MACD and stochastic. Choose the most suitable one of them or you normally use.
Filters the signal in accordance with the direction of the trend is going on
Following the direction of the trend in mind, surely you would open a position (buy or sell) price movement after experiencing a correction. For example, when you only want the uptrend open position buy at lowest level each time it appears, and when the downtrend you only sell every time its highest level. To find out the points of buying or selling you can filter the indicator of price movement oscillator.
The following example on the price movement is being an uptrend with the indicator RSI as a filter:
In the example above you can entry buy at the lowest levels (buy the dip) with the confirmation level indicators are oversold RSI. In contrast to the movement of the price downtrend, you will sell at the highest level of entry (sell the rally) and the confirmation level indicator oversold RSI.
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