THE TREND IS YOUR FRIEND
NEVER A TRUER WORD SAID WHEN TRADING BE IT BINARY OPTIONS OF FOREX
The Trend:-This is probably one of the most fundamental basic strategies out there. If you have been looking at trading be it forex or whatever you will have read about "following the trend" on many websites and books. The reason why is because this strategy works it can be traded on any time frame, any currency pair, long-term, medium-term, even scalping.
Traders who use this strategy simply jump on the trend when they have perceived that a trend has established and ride it. If there is a turn contrary to the trend, they exit and wait until the turn establishes itself as a trend in the opposite direction. In other words they jump on a trend and then exit the trend when market turn against them to minimise losses and maximise profit.
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| No it's not, just not understood. |
Here is my take on this highly popular strategy.
Now as simple as it sounds you do need to understand a few things:-
1. What a trend is and how to spot one.
2. How to determine the trend direction.
4. When to get in.
3. How to exit the trade
So in a nut shell that is basically it, I make it sounds easy don't I? So the big question is "if it is that easy then why do people loose?"
Well lets take a look at a few things. First of all though we will ignore the individual as every ones perception is an individual perception of the same thing and differ.
So what is a trend?
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| We have three different trends as seen above |
Lets get started. If you are quite new to trading I would suggest you learn how to evaluate the trend using a top down method ie. using the Daily, four hourly one hourly, 30 minutes and 15 minutes (D1, H4, H1, M30 and M15 ). Using the top down method is by far the best way of spotting the overall trend.
Now that all sounds fine and dandy however there are a few other things to remember like what length of trade are you looking at? is it short (5 minutes to a couple of hours) or is it long, also the news forecast always expect the unexpected.
You can forget about all those hundreds of indicators that people go on about. Trend following is not based on the Fibonacci etc.
Trend following uses a straightforward and reactive method. Remember there are so many different types of trades but we are looking at the short term trends and as such we only use two indicators.
However having said that don’t fixate on the technical indicators used in any trend following system. they are important, but not the key, it’s a tool that's all, you need the human element and that is you. There is no Indicator that is going to give you a 100% win rate as I said they are a tool from your box not the kit.
So you spot a trend, get in on a trade, good for you but when do you exit? Well with that I can't help you, that would be down to the individual and how they perceive the trend? Will it correct it's self? Could it be just be a reaction to the thrust? Or is the reaction going to continue and become a thrust?
Only Time, Practise and Learning on your part will determine the action you take and there is no better way to gain your experience than from a company that is renowned for it's teaching of ever thing trading from Money management to reading the charts without all the bull shit.
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Paul Davey (Senior 2 Trader)
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