Buy on weakness forex strategy – one of the most popular stock trading strategies is the buy on weak (BOW) strategy.
The buy on weak strategy is one way of trend analysis that you can use to make decisions in buying stocks in addition to buying on strength (BOS).
A buy-on weak strategy is a strategy where traders buy stocks at low prices in anticipation of a reversal.
The buy on weak forex strategy is one strategy where traders take long positions when the price reaches the support level and tends to be safe to buy.
The goal of this strategy is to get a better or lower price and sell it back when the price goes up.
This strategy is also known as the buy limit. In this type of transaction, the trader will buy if the price that was rising will reverse direction below a certain price before continuing to increase again.
Simply put, the buy on weak forex strategy targets stocks that are down (discounted) and have the potential for a rebound.
This buy on weak forex strategy is like buying a stock whose price is being discounted. There are several strategies that traders often apply, such as buying stocks after a breakout, buying stocks that are rising high, or even buying stocks in sideways conditions.
One of the most popular ways is to do a buy on weak forex strategy in a trend channel, it can be in a bullish, sideways, or bearish trend.
Bullish Trend
The buy on weak forex strategy during a bullish trend is relatively safer because support becomes a place for price rebound and forms a higher low and minimal breakdown.
So, if one day the trader misses the moment to sell the stock at a high price, the next support is still above the previous support.
Sideways
Using a buy on weak forex strategy when sideways can not only see support, but also the phase or stage in the stock cycle.
Sideways that occur during stage 1 are sideways after a downtrend. While the sideways that occur in stage 3 are sideways after the uptrend.
The sideways risk in stage 3 is greater because there is a potential stock breakdown so you have to be more careful.
Bearish Trend
Buy stocks at support to take advantage of a short-term reversal. Buying stocks with a buy-on weakness strategy when a downtrend will only invite no small amount of risk.
A buy on weak forex strategy can use trendline support as a buying area and look at volume as an indication of selling pressure.
If the price is already in the trendline area and volume is weakening at the same time, then you can use it as a moment to buy and sell at the trendline resistance area.
The advantages and disadvantages of the buy on weak forex strategy
The main advantage of the buy on weak forex strategy is that the price goes down. Discount and liquid prices are highly preferred by traders, so when stock prices are at support, their prices can potentially rise quickly.
While the drawback of the buy on weak forex strategy is that it targets stocks that are falling, so if the analysis is not balanced with qualified indicators and does not have much experience in analyzing downtrend stocks, then your stock price may fall again.
So, there is nothing wrong if you want to use a buy-on weak forex strategy, but you must use the right analysis and be sure that stocks in the support area can indeed tend to rebound.
If you are still a novice trader, then buy stocks in small quantities first or buy in stages.
For those of you who want to use a buy on weak forex strategy, pay attention to the following points that you can use as a reference in doing a buy on weak forex strategy to minimize losses:
- Do a buy on weak when you are sure that the pairis indeed discounted and tends to be safe for trading
- Having the ability to read trends, you must be able to distinguish between which prices are indeed in a downtrend or are bad and which ones are really discounted and there is a chance for a rebound.
- If you want to buy, then make sure the pair you want to buy using the buy on weak forex strategy tend to be liquid and there is no bad news about the company’s fundamentals
- Look for a pair that is correcting and there is a sign of a rebound