If you are a newbie to Forex usually one of the hardest aspects to to get passed is acknowledging the trend. This is a big mistake as the trend is your greatest friend in this business by far. We all do it, it is human nature, we look at a chart going down and it is natural for the mind to think it will now start to go up.. Until bam, you keep losing, the trend keeps going. That is why working out the trend and then finding retracement areas to buy or sell in is the most effective way of trading. Otherwise trading is just like driving up the wrong side of the road.
Working out the Overall Trend in Forex –
- Use the Daily Chart
- Add your trend lines, is it up or down? If you can not tell then you should not trade that pair, move onto a currency that is trending good.
- Look for retracements, there are lower highers in a down trend and higher lows in a up trend.
Above – Uptrend
Above – Uptrend
Above – Downtrend
The above image shows the up trend in the daily chart on the GBP / USD and a possible retracement forming on the trend line, if we see some good confirmation in that area then that most likely is a good long trade.
A good spot to place a stop loss on this trade is just below the lowest candle wick on the daily once you believe it is starting to go back into the trend. If however the chart breaks the bullish trend line then this bullish trade is negated.
The above video : Traders Best Friend is the Trend By Richard Krivo – Is a highly recommended video on how to determine the overall trend of a currency pair. This video i have watched myself a few times, it is something that should never be ignored in all types of currency trading.
5 Reasons Why Trends Are Your Friend?
Above Video – My 5 Reasons On Why In Forex Trading the Trend is one of your biggest friends.
If you are looking for trend training then I would recommend checking out The 5 Day Trend Training Series. A series dedicated to helping identify trend evidence in the market and how to trade it effectively as well.