Entering a Trade at a More Favorable Price

When identifying a pair that is in an

uptrend

, the concept of

Buy the Dip

can be put to good use. The idea is that as the pair continues to move higher, invariably there will be pullbacks/retracements/dips that occur. When those take place, the trader is presented with an opportunity to enter the trade (buy on a dip) in the direction of the trend at a more favorable price.

Take a look at the Daily chart of the

USDCHF

below for a visual on this concept…

To time our entry into the trade, an oscillator can be used so we can enter when bearish (downside) momentum shifts to bullish (upside) momentum. In this case we chose

Slow Stochastics

. (Note the timing of the entry with the Slow Stochastics crossover to the upside in the circles.) When buying on dips the stop can be placed just

below

the lowest candle or wick that occurred during the retracement or dip.

In a downtrend, the process would be reversed. Take a look at the Daily chart of the

EURUSD

below…

As price action moves up, we would

Sell the Rally

back into the downtrend. In this case we chose Slow Stochastics again to identify when bullish momentum has shifted to the downside. We would enter on the bearish crossovers shown in the circles. Stops would be placed just

above

the highest point in the rally to the upside.

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