An essential part of any trader’s currency trading education is learning to spot trends, if we consider Forex Income Engine 2.0. This is your signal that the market is making a sustained move, either down or up, and you can gain from it by opening a trade. The famous exclaiming ‘the trend is your friend’ is at the heart of this technique.
Using trends to benefit from Forex Trading may appear just about too simple. Yes, it’s a simple methodology, but it works … Provided you can tell the difference between an emerging trend and an insignificant fluctuation. That is where the ability, experience and tools come in. But really it’s a very simple methodology and you shouldn’t try to complicate it.
There are several alternative ways of identifying a trend using either technical analysis ( charts and indicators ) or market information ( fundamental research ). Drawing trend lines on a candlestick chart is perhaps the most straightforward strategy. You can identify triangle patterns that may predict a breakout in one direction or the other, and check these against other indicators like the MACD crossover. It’s also wise to check your pattern on charts for different periods, e.g. Check hourly against daily charts etc .
There is no must know all the different methods for noticing a trend. Perfect one or two reliable strategies and you have all that you need to earn money. Remember that all strategies have their successes and their screw ups, and it is the overall profit or loss over the long run that counts. Do not be put off by one failure, and control your risk so that a couple of losses in a row will not have a big effect on your funds or on your confidence.
Experience can make all the difference and you would be well advised to practice on a demo account before trying out your method on the real market. Traders with many years of experience can regularly recognize patterns without even knowing that they are doing it. They don’t consciously remember having seen a situation before, but long experience of watching and trading the markets gives them a deep information that will regularly help them identify signals very fast. It is worth beginning to develop that experience before you leap in with real money.
At the beginning you will not be ready to ride the whole of a trend from its kick off point to its top or trough. In fact, hardly any trader ever does this. You need to wait to be certain a trend is forming. Similarly, don’t try to hang on till the last moment to grab every last pip. Set your profit target and be happy with it. In the long run this could pay you better than trying to 2nd guess the market.
Eventually, don’t follow any kind of Currency Trading system that relies on changing your position size depending on whether your last trade was successful or unsuccessful. This is a recipe for disaster, as thousands of ruined gamblers have uncovered. If you’ve a good system your profits will surpass your losses without resorting to betting. Investing time in your forex trading education is the secret to meaking money from the foreign exchange markets.
