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Forex upper bound how to trade?

Forex trading is a popular form of investment where traders buy and sell currencies in the international market. As with any trading activity, there are different strategies that traders can adopt to maximize their profits and minimize their losses. One such strategy is known as the upper bound strategy, which is especially popular among experienced traders who have a good understanding of the market and its dynamics.

What is an Upper Bound?

The upper bound is a price level that acts as a resistance level for a currency pair. It represents the highest price that a currency pair is expected to reach in the short term, based on the current market conditions. When the price of a currency pair reaches the upper bound, it is likely to face strong resistance from buyers, who are likely to sell their positions, causing the price to fall back down.

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How to Trade using the Upper Bound Strategy?

The upper bound strategy is based on the assumption that the price of a currency pair will not surpass the upper bound level in the short term. Therefore, traders who use this strategy will look for opportunities to sell their positions when the price of a currency pair approaches the upper bound level.

Here are the steps that traders can follow when using the upper bound strategy:

1. Identify the Upper Bound Level

The first step is to identify the upper bound level for the currency pair that you want to trade. This can be done by analyzing the price chart and looking for the highest price point that the currency pair has reached in the recent past. Traders can also use technical indicators such as moving averages or trend lines to identify the upper bound level.

2. Wait for the Price to Reach the Upper Bound Level

Once the upper bound level has been identified, traders should wait for the price of the currency pair to reach this level. This can take some time, and traders should be patient and not rush into making a trade.

3. Look for Confirmation Signals

Before making a trade, traders should look for confirmation signals that the price of the currency pair is likely to fall back down from the upper bound level. This can be done by analyzing the price chart and looking for bearish candlestick patterns, such as the shooting star or the bearish engulfing pattern.

4. Sell the Currency Pair

Once the confirmation signals have been identified, traders can sell the currency pair at the upper bound level. Traders should set a stop-loss order above the upper bound level to limit their losses if the price of the currency pair breaks through the upper bound level.

5. Take Profits

Traders should take profits when the price of the currency pair falls back down from the upper bound level. Traders can set a target profit level based on the support level, which represents the lowest price that the currency pair is expected to reach in the short term.

Conclusion

The upper bound strategy is an effective trading strategy that can help traders maximize their profits and minimize their losses. Traders should be patient and wait for the price of the currency pair to reach the upper bound level before making a trade. They should also look for confirmation signals that the price is likely to fall back down from the upper bound level and set a stop-loss order to limit their losses. By following these steps, traders can successfully implement the upper bound strategy and make profitable trades in the Forex market.

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