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The Forex Edge by James Dicks

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CHAPTER 22THE CONTRARIAN BB STRATEGY

The core philosophy that I profess about adopting a contrarian point of view on the forex markets is based on two premises: the first is that the majority will most often be going in the wrong direction, and the second is that prices will always tend to regress to the mean.

If you watch the microstructure of price action on any currency pair closely, you will notice that in normal conditions, price exhibits a relatively stable behavior and seems to hover around and come back to a precise value time after time. This is what I would call the “fair value” for that instrument.

People are buying and selling in a short range, which shouldn’t change the average value much. Each buyer needs to have a seller and vice ...

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