That was the idea that
famous speculator Jesse Livermore realized and the idea helped him to make
millions in stocks and commodities trading both on the long and short (buying
and selling) side. According to his own words when he day traded he failed to
see the big picture and the prevailing trends in the market. When he realized
that he should follow trend, he stopped losing money and started making it
regularly.
The good news is that
big moves happen almost every week. We call those swings. Trends are longer
term moves that happen one or two times per year, while swings do happen every
week, both as directional and correctional moves. If you look at the chart of
gbp/usd below you can see that the pair has been in a range for some time, but
within the range there were plenty of swings every week that you could play on
the long and sort side. On the 25th of January the pair was mostly
in downward swings with some correctional swings. You would have made more
money selling correctional rallies than buying dips in a downtrend. However as
moves lasted from 5 to 10 business days with the help of trendlines, key price
points, resistance points, key reversal days (Fridays and Mondays) you would
have made money trading either direction.
My point is that you
need to see bigger picture: from one to three months. Then you will be able to
see those key resistance and support points where reversals typically take
place and place buy or sell orders respectively. You may measure number of pips
from one peak to another to calculate possible reversal point in a downtrend in
order to take a position and number of pips from one bottom to another in order
to guess a reversal point and initiate a buy order in an uptrend.
These weekly swings
help you not to get lost in daily fluctuations and to see bigger picture more
clearly. Seeing it you would probably trade less, but more profitably and on
each trade make more money. Good luck.
Disclaimer: Your capital is at risk.
Further reading: