What does Buy-Low-Sell-High mean in the forex market?

"Buy low and sell high" is the essence of the market cycle. While the market forming its trends, it will not move up and down in a straight line. Instead, the market sometimes adjusts price in the direction that is contrary to established trends. For traders, the goal is to seize the low points formed during a rising trend, and then buy at a discount when the price falls. Today, this article is to tell you what is buy low and sell high in the forex market?

When prices fall, the market will form a high point and a low point at a relatively high level. A high point is formed before the price, whereas a low point represents a short-term reversal trend. There are many reasons for the formation of these high and low points, such as the return of profit, the rebalancing of investment portfolio and the herd effect.

Conversely, traders who trade in a downtrend try to seize the top of a larger price adjustment and sell financial instruments at higher prices. If the market continues to fall, they have higher profit potential. When the market is in a downtrend, it will form a low point and a high point at a lower level, and each low point will be formed consecutively lower than the previous one. The low level represents a reverse trend. A little tip: Going long at the highest point will be the best position to short the market.

While this may sound like a simple trading strategy for making continued profit in the market, many traders still find it hard to judge how low to buy and how high to sell. In this regard, technical indicators may indicate the direction for traders. Investors can use Fibonacci levels and the moving average to determine when to enter the market and how to use market sentiment indicators to pin down the top or bottom of a price adjustment.

Market sentiment indicators can also be used to buy low and sell high in the market. Changes in the market sentiment often lead market trends to reverse in a cyclical-like pattern. When the economy is in recession, fear dominates the market and every trader would start to sell. This is usually the best point to buy in the market. Similarly, when the economy is performing well, the market is hitting a new record high, and optimism will drive prices way higher above their fair value, providing investors with huge trading opportunities.

Traders can weigh up the current market sentiment based on the Consumer Confidence Index and the Consumer Sentiment Index, such as consumer confidence surveys, PMIs of the manufacturing and service industries, futures positions of the forex market and other reports.