You have heard it before buy low and sell high is a great way to make money it is but most traders totally misunderstood what it actually means and lose. In addition, there is a far better way to make money in forex trading lets look at it.
Most forex traders see a currency approaching a low or high and buy and sell respectively their aim is to buy low and sell high.
Now sometimes this works but most of the time it does not and traders learn a lesson from the markets which involves the demise of their account equity.
If you try and buy a bottom or sell a top you have to predict in advance. In other words, you hope the level holds – in reality if you rely on hope in forex trading (or any other venture for that matter) you will lose.
The best way to make money is NOT to predict or hope but to act on confirmation.
If you act on confirmation you are trading a reality – NOT a thing that may happen.
For example, if prices dip to support, then you do not buy – you wait and look for confirmation that it has held and then execute your trading signal.
For confirmation you need to use some momentum oscillators.
We do not have time to go through them here – but great ones are the stochastic and Relative Strength Index.
If you use them they will give you changes of momentum which are advance warnings of trend changes.
Once you learn how to do this you wont catch the turn (you cant do that anyway) but you will get the chunk in the middle around 60 – 70% and if you do, you will make a lot of money.
Now forget "buy low sell high" – a better way to make money and the only way to catch the really big trends is to – "Buy high sell higher"
Most big trends start from new market highs NOT market lows.
These are called breakouts and people who believe in "buy low sell high" miss them.
They want prices to buy pullback so they can get in at a "better price" but of course, prices do not pullback – they sail away into the blue yonder and the trader thinks about what might have been.
If you grit your teeth and buy them (and yes you do miss the start of the move but like we said earlier you cant predict that anyway) you will make huge gains, as breakouts from new market highs have high odds of success and move quickly .
Buying Breakouts For Huge Gains
If you were just to focus on breakout trading in major trends, you would make a lot of money with an easy strategy that most traders refuse to do.
Traders hate not being able to buy a low or sell a high, their looking for perfection and not focusing on making money – if you focus on simply making money and forget perfection, you could build serious long term wealth.
So forget "buy low sell high" and think "buy high sell higher" and you will make a lot more money.