Traders can find a good trend and then trade profitably with higher prices. Market exit management can be performed using previously identified highs and lows.
However, it can be extremely difficult for new traders to quickly identify a trend and complete a trading strategy. Nevertheless, one can learn to predict Forex trends, and most trend-based strategies can be divided into three logical components. This is what every beginner should learn first. The following are the basics of trending strategies, which are built on identifying trends, planning and determining output.
How to determine the forex trend?
The first step to understanding a trading trend is to find a trend. There are many ways to identify a trend, but the simplest of them is finding a price that creates higher highs or a higher low. For example, if the price in the GBP / USD pair sharply rises, this means that it is making higher highs and the trend will go up. Conversely, if the price moves towards lower lows, then the average price is potentially reduced as part of a downtrend.
However, here you need to remember one important detail: a trend, in fact, is not a strategy in itself, but simply an additional point of leadership that increases the likelihood of successful trading. Nevertheless, simply using the trend in the market is not enough.
How the market moves (higher or lower), what are its previous turning points - all this becomes reference points that you can use to determine market trends. The easiest way to determine a trend is to check and see how the market makes a picture of higher highs and lows. This is just a good old visual observation of the nature of price action on the market at the present time, but it will help to see the upward or downward Forex Trend. Although this is not a strategy, such a simple chart is a must-have. This monitoring gives you the basic idea of finding higher highs (LH) and lows (HL) for uptrends and lower highs (LH) and lows (LL) for downtrends.
Given the information above, traders should look for opportunities to buy GBP / USD in their current trend. If the trend continues, it is expected that the price will remain at a high level, while new highs will continue to be created.
Planning
Once the Forex Trend is found, traders can choose one of many tactics to enter the market. One of the easiest ways to enter it is through the use of a breakthrough. Since the definition of an uptrend is to create higher highs and lows, traders can plan when to enter the market when the trend continues, and the GBP / USD movement will move to a higher high. In addition, the Forex rating includes several currency pairs, the fluctuations of which are always worthy of attention.
Traders using this technique can set a record above this value, and in between price fluctuations they will be introduced into the market. There are two advantages to using input order.
Firstly, you should not be constantly on the Web and personally control the situation in which you want to start trading. As long as you have a prepared plan recorded by an assistant and you have chosen a price for trading, your order will be automatically triggered.
Secondly, the transaction price never rises above the previous maximum. However, this order can also be removed. Now that you have a written plan, you can look at the final part of your strategy.
Shutdown
When trading on the currency market, you should be prepared for the fact that you can lose money at any time. That is why, using Forex trends, it is important to know that you cannot use them forever. In a trend, traders can place stop losses below the previously identified minimum fluctuation (above the lowest).
In the event that the price breaks below this value, this may mean that temporarily (at least) the trend may be over. Traders can exit one position at this point through the use of stop orders.
What do you need to remember?
Knowing how to make a profit is also an important part of any trend and trading plan. Traders should take care to avoid the number one Forex error, when, in an effort to get more profit, a market participant takes big unreasonable risks and as a result loses all the money. Using the example above, the conclusions can be drawn as follows: if a stop loss of 150 pips was set for a swing minimum, traders can expect a significant profit. But if the limit of 300 pip is still set, this would create a risk / reward ratio in the ratio of 1 to 2.
Speaking further about trading foreign currency for beginners, it is necessary to consider how to identify Forex trends, and from a different point of view. Many new traders have heard that the trend is your friend as long as it does not lean. This rule works not only in Forex, but also in any other market.
Forex Ranking and Strategies
The ability to identify long, medium and short-term trends in the direction of the currency pair will help you to benefit greatly, since you can realize much more of your plans in this.
So, the downward trend of Forex is a direction in the daily chart when searching for entries at lower price indices. It allows you to conduct measured calm trade. The lower value of the price should not confuse you, you should not worry about whether this trend is going up or down. It is important only to use this movement to your advantage.
Where to begin?
The first thing that you want to do at the beginning of the trading day is to carefully study the daily charts of the currency pairs you work with. Pay attention to a strong trend in any direction. Considering that you are working with daily charts, the indicators for the next day will mainly display very similar results, since day trading is characterized by strong long-term trends. Do not be fooled, but boldly use yesterday’s indicators on the next trading day. If you study the daily charts and indicators of the trend Forex at least once a day, this will help you keep abreast of any major movements in the market.
Using a daily chart should facilitate many tasks for traders. First of all, it will help to determine whether a currency pair is in a strong trend. If there are confirmed doubts about this, go to the next currency pair chart.
Cycling
As already noted, the studied Forex market trends will mark a movement in one direction, which then slows down and will either consolidate and change, or repeat cyclically. It is on this basis that you can apply any strategies that are suitable and convenient for you.
That is, the trader must follow any obvious setting of the price action, which is formed after the market rolls back to the "merging" level. It can be a swing point, a moving average or some other level of support or resistance. In any case, one should trade “from value” in the trending market.
Moving average
So, one of the tools you can use to find “value” in the market is the moving average. This is not an ideal meter for all occasions, but sometimes it helps to trade efficiently, especially if you use exponential moving averages (EMA) on days 8 and 21.
Experts recommend using them as a general guide or assistant to find significant points in the market. For example, often the 21 day EMA will coincide with the swing point in the trending market. It turns out that you have several factors that can be put together.
Is the Forex Trend Strategy Ideal?
However, these moving averages should only be used as a general guide and not an actual signal. Remember that you use them only as an assistant to see the dynamic support and resistance levels (to add a merger), as well as to trend direction. However, your main focus is on visual observation of price activity in the market and changes in levels, that is, without any EMAs.
In addition, it is important not to fall into the trap of the so-called “breakthrough”. Many novice traders stay in one cycle and at the same time try to trade breakouts all the time. In fact, this is not an effective long-term strategy, because large market participants take this circumstance into account, and it is unlikely that you can constantly play in your favor. Instead, it’s better to come closer to key market levels, swing points, EMA levels in the market and always correlate them with price signal confirmation.
Concluding remarks on trading with trends
You should always use Forex trends immediately when they occur. You can never know how long they will last, so try to use them when they are present. Markets, as a rule, are trending only from about 25 to 35% of the time, and the rest of the time they are in range or floating activity. The main trick is to learn how to identify a trending market in order to get the most out of it and successfully exit as soon as possible.