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Forex Tips – Buy The Dips And Sell The Rally

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I bet you have heard of the statement “The Trend Is Your Friend”. From this statement alone, you should understand the importance of trading in the direction of the trend. However, not many people really know how to trade in the direction of the trend. Therefore I decided to write this post to elaborate more on how you can trade the trend.

The key to riding the trend is to always remember this statement: Buy the dips in an uptrend and Sell the rally in a downtrend.

So how can you buy the dips in an uptrend?

Even when the price is in an uptrend, there are also times where it will retrace backward before it continues to move further up. The time when it retraces are known as DIPS.

If you are able to analysis when the dips will reverse, you will be able to enter a LONG trade when the price moves back up.

Here is when you should enter a LONG trade in a DIPS:

1) Trend Line: The trend line serves as good support level when the market is in an uptrend. Whenever you see the price retraces back to the support level, you can enter a LONG trade.

Buy The Dips

2) Oscillator Reaching Oversold: You can make use of oscillator like the Stochastic or RSI to help you check if the price has reached the oversold zone or not. This can gives you additional conditions to enter a LONG trade.

The same apply to a market that is in a downtrend. There are also times where you will see the price retraces up before it moves back down forming a RALLY.

The way you trade the RALLY is the same as the DIPS except that you should be looking for resistance level instead of support and oscillator reaching overbought instead of oversold.

Sell The Rally

I have been trading profitably with this principle of buying the dips and selling the rally. Hope that you can benefit and make money from it too.

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About Kelvin

Kelvin Lee is a full time currency trader who has been trading forex for several years already.

11 comments

  1. Keven, I had wanIed to buy your trend book, but could not because the master card i use is not accepted. I am from Nigeria a country every body is avoiding. Does it mean that nothing else is good from Nigeria when fews individuals are bad. I wonder. Very soon the internet will be closed against Nigeria.

  2. When u say use the RSI or Stochastic to look for overbought/oversold conditions, what sort of settings do u use, coz different people use different settings. Frim yr experience, what works best? Tks.

  3. I was wondering were do i put my stop loss using the dip and rally system.

    Regards Daniel

    • Hi Daniel

      Regarding your question on the stop loss, you can simply place it on the most recent swing high if you are going SHORT or you can place it on the most recent swing low if you are going LONG.

  4. Thanks. In what TF was this examples ? GBU

    • This strategy works in all time frames. As for the example, it is taken from a daily chart. Try to spot them on your other time frames and see if it works. Good Luck

  5. GREETINGS,
    DO YOU TEACH FOREX FROM THE GROUND UP? IF SO, PLEASE TELL ME YOUR FEES AS I FEEL YOU REALLY THOROUGHLY KNOW FOREX AND HOW TO TEACH IT. I’M A NEWBIE
    AND THERE IS SO MUCH TO LEARN TO BE A FOREX TRADER. I FEEL THAT YOU TEACH
    WHAT IS TRULY NECESSARY. IF YOU TEACH FOREX, WHAT ARE YOUR FEES?

    MANY THANKS FOR THE INFORMATION.
    SINCERELY,
    LEWIS WANZER

    • I am currently tooling up some videos to make it into a forex course. The price will be set at an affordable rate so that all people who are interested can learn and eventually make money from it. I will let you know once it is ready. Thks for your interest

  6. GREETINGS,
    HOW CAN YOU TELL WHEN THE DIPS WILL REVERSE?
    WHEN A CHART IS USED, THE ACTION ON THE CHART HAS PASSED. THE CHART IS NOT REAL TIME—–IT SHOWS WHAT HAPPENED YESTERDAY. RIGHT?

    SINCERELY,
    LEWIS WANZER

    • In order to better identify the reverse, you need the help of trend lines and oscillator.

      If you are looking for a reverse in an uptrend, you should take note when the price closes in on the resistance level. If you are looking for a reverse in a downtrend, you should be looking out for the price when it reaches the support level.

      In addition, you can check if the oscillator is oversold or overbought as this can help you better identify a possible reversal.

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