An Important lesson of pure technical analysis.

Here we have got another EUR pair.

As you can see, the EURAUD pair has recently taken a move back up. We are going to discuss and examine in detail why we would be going short now and why we would be taking it long again, for a longer term trade.

These key points really are fundamental for any chart, you must first understand risk management and then proceed to employ these extra methods into your trading.

These points involve:

1. Dollar cost averaging of positions.
2. Buying dips and selling when price rises.
3. Trading with the trend.

As you see on our chart, we had a move back down to key support as highlighted, at which point we went long. We have now had a short move up to our previously noted target (See other charts posted). We have reached a key level and we can now begin to sell, following our rules as normal:

It is important to understand that if you spread your risk out over multiple positions, rather than just one, you stand a much better chance of having a successful trade.

Similarly, if you are trading a trend and you are buying dips (when price drops in an uptrend) and selling price rises (when price comes up in a downtrend) you are again in a better standing, because you are following the trend and you are getting a better price at that time. Trends tend to run like waves and they keep going.

When you mix these core aspects with indicators like our MA's and stochastic oscillators, you get a great gauge for where price is and where you want to be.

So in short, rather than buying all at once, split up your positions and buy on dips/sell on rises.

Use your indicators to give you an idea of where you are on a current trend and how high or low price is. The lower the price, the further you spread out your longs. The higher the price, the further you spread out your sell positons and vice versa.

Comment:

Early targets hit for gains.