When trading forex, the trader must choose the best strategy that will give him many profits. The forex strategy includes the technical analysis techniques, the currency pairs to be traded, and the entry and exit point indicators. Money management also is a part of the strategy.
The technical analysis for our strategy is presented here as part of the strategy. This is of course the most important part of the forex trading system along with he money management. The strategy presented depends on noticing the overbought and oversold conditions. When the market goes very high for long time, this will indication the market will go low soon. The reverse is true.
To determine the overbought and oversold conditions, two indicators are used. The first is the stochastic while the second one is the pivot point analysis. The stochastic is a very good indicator that shows how much the price increases r decreases over a certain period. It is expressed as a percentage. It is high then the market moves high and the reverse is true.
The second indicator is the pivot point analysis. This analysis technique depends on identifying various levels on the graph. There are three levels that act as resistance levels and other three that act as support levels. The resistance level is a level the price cannot go above it for a large period. The support level is a level the price cannot go below it for a large period.
If the price goes to a higher pivot level (which can be support or resistance) and the stochastic is high or low for a large time, then a reversal will occur. Then a new trade can be entered accordingly. Thus, in this forex trading strategy, w wait until the market saturate to high or low and then sell or buy depending on the situation.
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