The Exhausted Selling Model As A Short Strategy
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Before entering the foreign exchange market to set a short position, remember that profitability can be maximized. An effective strategy is to check out prices and trading volume.

A trader may want to focus on “extreme” market activity and extreme market points; they are considerably safe since an incoming reversal is predictable. One way of accomplishing the task is to measure market momentum with regard to prices and trading volume; if the momentum is strong enough, it can yield favorable results as to which position is worthy of pursuit.

A tool that would come in handy is the Exhausted Selling Model.

An Overview of ESM

The Exhausted Selling Model (or ESM) is a pricing model; it is often used for the estimation of the progress as regards to a particular price point. In the process, it may require the employment of technical indicators and price oscillators of sorts. Granted that a forex trader is patient, and that extreme market conditions come into play, it can be quite profitable.

When the price of a security has been reached, the Exhausted Selling Model makes it determinable. As the name suggests, it is based on “exhausted” price levels; it gives light to some FX traders’ mindset that prices get tired of retaining a similar position.

ESM + Trend Indicator

The Exhausted Selling Model is a useful tool for trend traders; particularly, it yields information that can dramatically increase a momentum trader’s winning odds. It addresses the importance of chasing after the right market momentum; the direction of market momentum is irrelevant without a confirmation of the momentum’s strength.

As mentioned, the Exhausted Selling Model may be reliant on various technical indicators and price oscillators; for one, the Average Directional Index (or ADX). Since the identification of price movement, as well as the strength or weakness of a trend, is necessary, it can point out a safe price level. Although it can be quite complex, using certain tools for analyses can be rewarding.

Fibogroup analyzes, if an FX trader prefers to turn to fundamental analyses tools in relation to the use of the Exhausted Selling Model, the Commitment of Traders (or COT) reports can provide assistance; it is a weekly report. Since it reveals information about long contracts (that tend to be excessively high), it can be employed to recognize reserved long positions; the knowledge of reserved long positions can be used as determinant for favorable short positions.

The Possibility of Impulsive Shorts

Once again, it is important to note that when using the Exhausted Selling Model, sharp analysis skills are required; amateur FX traders may want to employ other tools. Seasoned traders, particularly the risk-takers, belong to the group that can raise its success with ESM. This is due to the fact that the more experienced bunch makes the concentration on extreme market conditions a habit; with every opportunity to observe market movement comes the preference for high trading volume, as well as extreme highs and extreme lows.

Moreover, the Exhausted Selling Model is a very useful tool for impulsive traders and even panic sellers. Regardless of whether setting long-term forex positions is the original intent or not, it can be used by market participants who are determined to exit the FX market once conditions appear favorable. If the price is going up or is going down for an extended period, it appears that an eventual twist that should also last for an extended period, can be expected.


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