Sunday, March 24, 2013

Currency Trend Trading

If you have ever though about trading Forex, you've been exposed to information about Currency trend identification. I'm sure you've heard the common saying, "The trend is your friend". Without a doubt you've probably tried to learn a Forex trend trading strategy or system. But the truth is, trend trading is not as easy as you might have been led to believe.

The first thing you need to do is be able to identify when a currency is trending. Then you need to have an entry strategy to join the trend at the best price. Obviously, that would be on a pullback. But how do you know if a price move is a pullback or a completer reversal of market direction? Without a doubt, this can get complicated fast.

I found this video that does a good job distinguishing between pullbacks and market reversals. Check out the video to see how you can determine if a trend will continue or change direction.



As you can see, looking back on the charts, it is quite simple to draw trendlines and determine when to get into the market when the trend continues. If is also simple to spot the difference between retracements and trend reversals. The problem is trying to figure all this out under live market conditions when the future is unknown.

An important aspect touched upon in the video is how Forex trend trading has a lot to do with how you analyze what you see on the charts. This makes trading the trend rely a lot on the individual, and not easily done by the novice trader. If pulling the trigger and getting into the market is a struggle, trend trading can be extremely difficult.

One way to make things easier is to use a service that identifies and alerts you to trending markets. When a currency pair is trending, you are alerted to the specific time frame of the strong trending pair. Basically, identifying strong trends is taken care of for you, which leads to many more profitable trend trading opportunities.

If you know a currency is trending, then you can use what you saw in the video to distinguish between retracements and reversals. If they are pullbacks, you can enter the market when the price action resumes in the current trend direction. If you think it is a reversal, you can avoid entering the market, or try to make your profits on the reversal.

In conclusion, Currency trend identification can be very profitable, if you can correctly determine trending currencies and time frames. By using a trend identification service, half the battle is done for you. All is left is to determine you trend trading entry and exit strategy.

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