The perfect way for traders to profit well from trend trading

Author: Forex Live | Category: Education

The trend is your friend

FX
Retail forex traders
have a couple of things going for them that they can utilize to nourish their trading accounts. And using freely available price charts, they can quickly identify both.

The first factor is the trend - locating currency pairs or other trending instruments and trading only those pairs or instruments in the same path as the trend. Then, the other factor is choosing a good trade entry point within the trends.

Finding Trends

People can see all kinds of complicated indicators, telling when there is a trend. The said indicators are often based on moving averages or similar indicators. Although these indicators can work, many traders misuse them. Unfortunately, they're not even that necessary. There is an easy way to know if there is a trend, and the only tool traders need is the ability to count.

When the trade is high, there is an upward trend, and people must search for long trades. Then, if it trades lower, there is a downward trend, and they should seek short trades.

Two recommended filters: a comparison to historical prices from both three months and six months ago, can be used to see if it really trades higher or lower. And this can tell if it's better to look for long or short trades or not to trade the currency pair at all. Also, traders can use this to measure how strong the trends are.

With that, by looking at some different prices, people will know which pairs to trade and in what directions.

Choosing Trade Entries

First of all, traders should know that by only trading in the same direction as solid trends, they have won more than half the battle. Trading with the long-term trend is more important than the used entry strategy. Most of the time, traders focus exclusively on the tricks of entry. Yes, entries are vital, but trading with good trends is more important.

The most reliable way to enter trades in forex is to wait for a pull-back - a move against the trend. After that, enter the direction of the trend when the price started moving in the direction of the trend. With that, it gives better overall results than trading breakouts as overtrading breakouts is another common mistake.

Refining Trade Entries

Everyone should be able to make money by following this plan or something similar. Still, like with all rigid systems, there are going to be losing streaks of a number of trades in a row. Traders can improve that situation, but it would be challenging for newer trades.

  • Several currency pairs are dead at specific times of the day. For instance, when people trade GBP/USD, they will see the best trades set up during London business hours.
  • There are better trades if people take the entry set-ups that are completing major double or triple top formations, or over and under formations, like set-ups confluent with fairly obvious support and resistance. But if there is an incredibly strong and 'runaway' trend, traders don't need to worry about that and take every entry.
  • The best trades typically go into profit pretty fast.
For bank trade ideas, check out eFX Plus

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