Action and Reaction

After the long downtrend in the EUR/USD over the past week my trading signals are telling me it's time for a reversal upwards, so for July 19 I'm placing a long trade for this pair. Hopefully it'll pan out - initial signs are good, as it's already up several pips over my entry price. But it's really too soon to tell, and if I followed my own advice I wouldn't be checking on the price at all. Oh well, too late.

Anyway, this long trade after a very steep, dramatic downtrend is a good illustration of the importance of signals that can capture both action and reaction in your trading system. Because the market is constantly bouncing back and forth in reaction to itself, as well as to outside events, and if you're only looking for the action without anticipating the reaction, you're missing out on a lot of trades. Now I'm going to try to get some sleep and hopefully this bearish EUR/USD market will decide to turn bullish for me. Just for a day, that's all I'm asking!

Post-mortem:
The trade worked - check out that reversal! My EUR/USD long position is currently up over 70 pips from my entry price last night.

Related topic:
Exhaustion signals - profiting when the market is overbought or oversold