How To Spot Forex Trend Easily
How To Spot Forex Trend Easily
How To Spot The Trend Easily In Currency Trading
Learn from this forex blog, how to spot forex trend easily. You may have heard of this frequently in some forex trading tutorials or forex blogs, ‘Trend is your best friend’. So there is really nothing to be afraid of trends in forex trading. In fact, one should leverage the power of the trend to make money in currency trading.
Although many people is aware that they have to trade with the trend, but surprisingly for some reason, a lot of people may have problem of spotting a real trend. It may be true that different people has different views on whether the currency pair is trendy or not. But the bottom line is, if you can’t spot a trend in forex trading, there is nothing else much simpler that you can do.
The first step that anyone attempts to trade the forex will be identifying the trend, wait for a good entry point into the existing trend and then hope to ride the trend as long as possible. So they will try to figure out whether its a down trend or up trend by looking at their arsenal of forex indicators. Are you doing the same too? If you are, that is the mistake that most people make! You should train your eyes to judge instead of using those moving averages to be able to know where the trend is.
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So how do you do it? It’s not as difficult as you think it is…yes, it’s simple! What you have to do is to pull out a chart of the currency pair that you would like to trade. First look at the chart and try not to look for very long, the first impression will always be the more accurate one. If price is going upwards from the bottom and if the past 3 to 5 candlesticks are bullish, then it’s obviously an up trend. Vice versa for a down trend.
If you are a short term trader, you should look at longer time frame charts to have an idea on what the main trend is before looking for forex trading signals in shorter time frame. For example, if you are trading using the 1 hourly time frame, you should also be looking at the 4 hour and daily charts to see what is the trend of the longer term. This will definitely filter off some whipsaws. Another example, if you are scalping the 5 minutes chart, what should you do, you will be looking at the 15 minutes and 1 hourly chart to read the trend.
Knowing where the trend is going always put you in the driving seat. So start training your eyes from now on to look at whether the charts are trendy or not. You can be sure that you will consistently make profits when you follow the trend with a forex trading system.
What is trend following trading in forex?
Forex trend following is an investment strategy based on the technical analysis of market prices, rather than on the fundamental strengths of the companies. In financial markets, traders and investors using a trend following strategy believe that prices tend to move upwards or downwards over time.
Learn trade these trend following trading in forex tips on this page and I guarantee you that you will be a better trend trader.
10 Trend Following Trading Tips
Tip #1. Identify Support And Resistance Levels
This is a no brainer. Identifying support and resistance levels is one of the first things you learn in technical analysis. It is the most important aspect of chart reading. But, how many traders really pay attention to it? Not many. Most are too busy looking at Stochastics, MACD, and other nonsense.
Some traders think that a support or resistance level is a specific price. Wrong.
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Tip #2. Analyze Swing Points
Swing points (some call them “pivot points”) are those areas on a chart where important short term reversals take place. But not all swing points are created equal. If fact, your decision to buy a pullback will depend upon the prior swing point.
Tip #3. Look For Wide Range Candles
Wide range candles mark important changes in sentiment on every chart – in every time frame. They mark important turning points and can often be used to identify reversals.
Tip #4. Narrow Range Candles Lead To Explosive Moves
Narrow range candles can also tell you that a reversal is imminent. This low volatility environment can lead to explosive moves.
Tip #5. Find Rejected Price Levels
On candlestick charts, lower or upper shadows on candles usually means that there is a hammer candlestick pattern or a shooting star candlestick pattern (if the shadow is long enough). Regardless of the name, these shadows mean one thing: A price level has been rejected.
hammer candlestick pattern
Imagine what this hammer candle looked like during the day (before it became a hammer). It was really bearish! But, at some point during the day, the bulls rejected the lower price level. I can imagine the bulls saying, “Hey wait a just a second. You bears have taken this too far. This stock is worth much more than the price that you moved it to.” And the buying begins.
Tip #6. Learn The 50% Rule
How can you tell if a candle is significant? Easy. Look to see how far it has moved into the prior days range. If it moves at least 50% into the prior days range, then it is significant. And, it is especially significant if it closes at least 50% into the prior days range. This usually shows up on the market chart as a piercing candlestick pattern or an engulfing candlestick pattern.
This concept is so powerful that I am suspicious of buying any pullback unless it moves at least 50% into the prior days range.
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Tip #7. The Gap And Trap Price Pattern
All gaps are important “tells” on any chart. But, there is one type of gap that is especially important when analyzing price action (and pinpointing reversals). This is called a gap and trap. This is a market that gaps down at the open but then closes the day above the opening price. It is easier to see this on a chart…
Tip #8. Measure The Depth Of A Swing
How far does a stock move into the prior swing? More than halfway or less? The answer to these questions are important because it can determine the future direction of the market.
Tip #9. Consecutive Up Days And Consecutive Down Days
Forex market will reverse direction after consecutive up days or down days. So, it pays to keep this in mind when you are looking to buy or short in maret.
Tip #10. Location Of Price In A Trend
You have heard the saying, “The trend is your friend.” I say, “The beginning of a trend is your friend!” That is because some of the best moves occur at the very beginning of a trend.
So, there you have it. These trend following trading tips and tricks will make you money in the market market.
You can use this information to make your own trading strategies and systems. Best of all, once you master this art, you will never have to rely on technical indicators again to make trading decisions.