Top market wizard Ed Seykota is the father of computerized trend following systems and one of the best traders of our times. He acknowledges that in order to be great at this game you also need to identify counter trend moves. If your answer is: a price move, usually smaller in nature, that is opposite to the prevailing trend, is a counter trend move.

Because a counter trend move will usually generate a small amount of pips we need to get in as close as possible from the very start of the counter trend move. Check the Essential Guide to Chart Patterns: HERE. No matter if you use trend trading vs. counter trend trading strategies makes sure you follow your trading plan. With proper money management, all trend trading strategies have the potential to grow your Forex account relatively fast.

The real secret to trend trade successfully is to not close your trade too early. Make sure your trend trade is generating at least a risk to reward ratio. In the currency market, due to the economic forces at work we can see trends being more prevalent. The long-term trends can last anywhere from a couple of months and can extend into year-long trends.

But, most retail traders are only short-term oriented. We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more. Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow. This step-by-step guide will show you an easy way to trade with the MACD indicator.

Get the free guide by entering your email now! Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page. Trend Trading Strategies - The Right Side of The Market by TradingStrategyGuides Last updated Jun 16, All Strategies , Forex Strategies , Indicator Strategies , Indicators 2 comments. Keep it simple and trade with the trade seems to be the devise of many successful traders.

For those of you who want to learn how to trade with the trend keep reading on. Table of Contents hide. TradingStrategyGuides says:. January 28, at pm. Remember this can be done on any time frame depending on your trading preference.

Notice the pick Lower Highs on the image above ramping up into the trend direction change. When you see higher lows or lower highs moving into a counter-trend move such as what is shown in the image above. Be wary of automatically assuming that the trend is going to change. Predetermine is one of the market's classic moves to get traders to jump in on the wrong side of a trade. Do not be one of the traders that get caught in a trend reversal fake. Understanding Trend Direction Market Structure: Once you fully understand the trend direction market structure, your next goal is to use this knowledge to find excellent trading entries.

Accurate analysis of forex trend direction will give you an edge in your trading. It will also help you to avoid the traps that plague so many traders.

In some cases, combining multiple trend indicators into a single trading strategy can be especially effective. If you look at the image here, there is a failed break of the uptrend. That failed break caused traders to go long, and those traders get trapped. The entry will be one of the most important components of any complex trading position. Now the part that everyone has a firm understanding of forex trend structure now, it is time to start planning a trade.

The important part of any forex trend trading system is understanding the setup. Here are the 5 steps. In the next example, I am going to illustrate a complete forex trend trade plan. The following graphic will contain all five elements of planning a trend trade. Step 1 Identify that the trend is moving down because of lower highs and higher lows. Step 2 We also mark out the key support and resistance areas as shown by the green and pink lines.

Step 3 has been completed as we have identified potential trade areas next we need to determine what the actual entry will be and what price has to do to confirm our trade. We also have to determine what price will do if it proves our trade to be wrong. The faster we can prove our trade idea to be wrong the better. Because we will put less money at risk if we can figure out if we were wrong quicker.

Step 4 Predetermine price below is an example of how we will predetermine before we take the trade, ensuring that you have a proper risk to reward ratio set and that we know exactly when to take our loss. When you are wrong, you are wrong; move on to the next trade.

The image below is the same trade zoomed up to give you a better view. Step 5 is to execute the trade according to your plan. Conclusion: Forex Trend Following Strategies and Tactics. Now that you have a firm foundation on how to identify and trade forex trends, you can begin to develop your strategies and tactics.

Start creating your plan and do testing to determine if trading forex trends are the right method for you. Please leave a comment below if you have any questions about Forex Trends Analysis! We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more.

Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow. How do you define a swing?

It is not clear and dry as in the depiction here. So How would you define a swing? So nice, i am trading at Teletrade broker, this might help me in my trading strategy. thank for your sharing. This step-by-step guide will show you an easy way to trade with the MACD indicator. Get the free guide by entering your email now!

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Trend trading is a popular trading strategy where traders seek to profit from an underlying trend either a downtrend or uptrend. For this reason, technical traders, as well as forex expert advisors, deploy a number of forex trading instruments to identify the long term trend as part of trend trading. Long-time frames are the best for determining trends for traders focused on positional trading.

However, for traders or forex robots engaged in scalping or swing trading, shorter time frames are often used to determine the underlying trend. So how do we understand a trend? Here are the basics of technical analysis, that help you to identify technical market conditions:. Uptrend When the asset prices are making higher highs and higher lows, we call it an uptrend.

Here the fall of price remains higher than the previous low. This fall is also termed as a correction. An uptrend consists of both up move and down moves. Up moves are bigger and higher than the down moves, which are correcting the prices.

Downtrend Similarly, when the asset prices are making lower highs and lower lows, we call it a downtrend. Here the rise of price remains lower than the previous high. This rise is also termed as a correction. A downtrend consists of both up move and down moves. Down moves are bigger and lower than the up moves, which are correcting the prices. Side-ways trend The markets are choppy, and the highs and lows compete and are tested against a new high and a new low, moving in the specific range.

Moving averages are some of the best forex indicators for ascertaining trends in the forex market, as they follow the trend of an asset. There exist various types of moving averages like simple moving average, exponential moving average, smoothed moving average, linear weighted moving average. Out of all, exponential moving averages have been more efficient in comparison, and from now on we will only follow exponential moving averages EMA. In these examples, we are going to use 21 interval period exponential moving averages and 55 simple moving averages to determine an uptrend and a downtrend.

First things first, why 21 and 55? It has been observed that prices move in patterns. The numbers come from the Fibonacci series and are mostly respected by traders across the world. A closer look at the chart above, it is clear that the EMA is above the 55 SMA from to May , with the moving averages sloping upwards. As long as the 20 EMA is above the SMA, the same is interpreted as an uptrend, and price often tends to trend upwards. The price continued to trend upwards until August 20O8 when the price reversed downwards.

Likewise, the end of the uptrend was confirmed in August as the 20EMA crossed the 55SMA from above signaling price is now in a downtrend. Here when we observe the yellow-colored line is the exponential moving average of interval and the blue-colored line is the exponential moving average of interval.

The interval moving average claims the signal and the interval moving average claims the trend. This calls a long-term bullish trend for prices and the short-term trend has also potential for the upside. Thus we have entered the trade at 1. Technical analysis is mostly about the strength of price. The moving averages lines flow over time in the desired trend, and so does the price.

As we observe that as the price reaches new highs, the averages rise along with it, and then gradually the difference between the lines narrows.

This is the phase where the asset prices are mostly correcting and consolidating. During this phase of the cycle, we do not trade, as the markets are choppy, and uncertain about the direction. The crossover is confirmed with the closing of the candle at 1. We finally booked a profit of pips. The rally from 1. This is a simple strategy and a very passive one. As we wait for signals to activate, then we proceed with the trade, so is the case here.

The concept of moving average is followed across all the assets. As the moving averages follow the footprints of the prices themselves, they ought to perform well.

We can perform backtesting on any of the asset classes to observe the importance of moving averages. The 4-hour trend trading strategy exploits the popular saying that the underlying trend is your friend.

Likewise, we use period and period MA to determine the underlying trend and the 1-hour chart for determining entry and exit points. With these strategies, traders or automated FX trading systems can eye buy opportunities when the 34MA is above 55MA and sell opportunities when the 34MA is below the 55MA signaling a downtrend.

In this case, a trader or other forex trading instruments would enter short positions as soon as price touches the 34 or 55 MA on a correction upwards, resulting in the formation of a big bearish candlestick. The moving average acts as a resistance level, whereby price bounces off and starts to move downwards. In this case, a trader would enter a sell position as soon as price closes below the moving average on the 1-hour chart.

The strategy is for the most conservative traders or forex robots that wish to take a limited number of trades. The strategy entails identifying the long term trend and placing a trade in the direction of the trend. The position is left to run in line with the underlying trend. A trader or an automated FX trading system would close the position only when the trend reverses and starts moving in the opposite direction.

A closer look at the first half of the chart above, it is clear that price is trading upwards above the D Moving Average. In this case, traders or forex robots could have entered trades as soon as price touched the MA from above and failed to breakthrough.

It is clear that a trader who entered long at position 1 stayed long as the price was above the MA. A sell position, on the other hand, would have been triggered at position four as price struggled to move upward after a pullback from an initial breakout.

The forex market is just like the equity markets, but here the underlying asset is not a company but the economy as a whole.

Thus, when prices move in patterns often at times, they try to reflect on the past economic performance. The famous double bottom and the double tops trade are easy to identify, and the following are the ways how we trade onto them. As we see that previously, the prices have fallen from the 1. That was the highest peak of the swing.

Later, we see the prices rejecting again from the 1. The catch here is, there might be differences in prices but the difference must not be too big. First things first, how to identify a confirmation in reversal? We see the candles at the second top having wicks on the top, this explains fading momentum for the bulls. Later when the candle closed below the previous green candle, we entered.

This is the point of confirmation when a candle with good strength closes below the prior bullish candle. Thus Bears have taken the charge. Before setting the Take Profit, it is important to set our stop loss.

Such that if bulls are so strong that if they can beat down a strong bear candle, the potential of bulls taking a higher high is possible. And thus we observe how easily the target is achieved.

At this point, we can book a part of open positions and let the remaining trade for the next swings low. Here, we also trail our stop loss to the cost price i. Reversals are observed with the help of the candlestick patterns. Usually, a bearish engulfing, an evening star, or a hanging man pattern is looked up to identify rejection from the top. As we sometimes see a pin bar candle on the top, we trade taking a short position on the next candle crossing its low, as discussed above.

In just this image, the understanding of the double bottoms would be cleared. Thus we have learned how to trade the double bottoms with proper stop loss fixed at the lows -5 pips of the strong bullish candle and the take profit at the previous swing high. Whenever double tops and double bottoms appear on a trending chart, they signify that the underlying trend is slowing and losing momentum.

However in March the same year, price formed a double bottom indicating that the downtrend had lost its momentum and that price was about to reverse upward as part of an emerging uptrend.

The Uptrend from the double bottom was confirmed on March 30 as the 20 MA crossed the 55 MA from below, signaling a strong uptrend. Traders prefer trading with trends. Betting against a trend is too risky even for scalpers. Once we identify a trend, with new highs, we understand it is an uptrend. So when does a trend continue? A trend continues when there is a breakout above the previous high.

So we trade only with the breakout levels considering a proper stop loss, to manage the capital at risk. Entry Here, by looking at the image below, we understand how the trend breaks about the consolidation zone and starts trading bullish. We enter at the close of the strong bullish candle. Stops and take profits Under this strategy, we keep the nearest swing low as our stop loss levels.

As we know, if that level is broken, the prices either will fall into a choppy range or a downtrend. Thus the low -5 pips would be our Stop levels. The previous high is expected to be tested. When we enter the trade based on a breakout, we must keep the next high as the take profit level. Also, we keep trailing our stop loss to the nearest lows — 5 pips, to be sure that the trend is continued. The disciple keeps a trader alive.

The best Forex trading strategies will be suited to the individual. The important part of any forex trend trading system is understanding the setup. Is XM a Safe Forex The following graphic will contain all five elements of planning a trend trade. As a bonus, we're also going to reveal some secrets to successfully counter trend trade.

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