One of the most important aspects of Forex is trying to work out the trend. I don’t care how good a trader someone is trends can change anytime and can also change and then go back. So what is a good indicator of this and how can you increase the chances of being in a good trend whether it is up or down.
First of all look at the daily and four hour chart. Work out which way the daily trend is first. After that keep that in your mind, then go back to the four hour chart and look for indications of breaks in major supports, if this happens more than twice then the trend maybe on a change. If so after the second confirmation of broken support by the four hour you decide to enter then do so by placing a SL just above the previous high in the up trend. This ensures that if you are right that you are safe in case you are wrong.
The negative side of this strategy is that by doing so you most likely are risking over 100 pips, however in the same light if this is a change in trend then the reward can be ten to twenty times that amount. Each factor needs to weighed in to the trader. Look for confirmations of resistance via price action techniques before entering to give yourself even more chance of success.
NZD / USD Short
SELL @ 0.8250
SL @ 0.8330
TP @ 0.8125 adjust stop loss, if it retracts take profit, if it keeps dropping further keep it open.
The screenshot of the NZD / USD above shows this in action over the last few weeks. Look at the two confirmations of breaking major supports before you know it is dropping or that the trend is going down now. Going by the 4 hour chart it shows that selling at 0.8250 has been very rewarding for traders for weeks. Look at the confirmations of resistance. There are 5. To me because of the trend change in the daily it shows that there is more probability of further downs if it breaks the 0.8040 area. However if it breaks the 0.8150 area it shows signs of buying all the way to at 0.8270.