Forex Trading Technique: The Trend Is Your Friend
It is widely recognized in the currency trading world that the trend is your buddy and any currency trading strategy based around following a trend, like No Loss Robot, is probably going to be both straightforward and effective.
It is easy to form trend lines on any forex chart, but most folks prefer to use candlestick charts for this as the candlesticks are such a clear visible signal. When trend lines are forming, you may use them as a signal to buy or sell the currency pair.
Step one in using trend lines for a {foreign exchange currency} trading plan is to ascertain whether the market is rising, falling or is stable inside certain parameters. Naturally there’ll always be fluctuations, but at specific times you’ll see clear patterns.
1. If the price is rising
If the price is going up, first draw a straight line thru the highest highs on the chart. This line will be sloping upward. Then draw another line thru the lowest lows on the chart. If this line is also going upward and is roughly parallel to the 1st, you’ve got an rising trend.
You can then use these 2 lines as support and resistance lines. This means that you can say that while the trend continues, the price will remain in the area between these 2 lines. Therefore , any time the price hits the top line you might sell, on the presumption that it will fall back. In a sense this strategy means going against the trend, but you would only hold that position for a short while.
or, any time the price hits the base line you might buy, on the assumption that it’ll soon rise again. In this example you follow the trend which is commonly a better strategy. However, you should bear in mind that there will at some specific point be a real reversal and you may be caught out by this.
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2. If the price is falling
If the price is going down, you can follow a similar methodology to the previous system. The lines you draw will be going downward but you’d still buy when the price hits the lower line and sell when it hits the upper line.
3. If the price is stable
If the price is actually not going anywhere, then the lines that you draw through the highest highs and the lowest lows will either be horizontal and parallel to each other, or they’ll be converging ( drawing closer together ) or diverging ( drawing apart ). If they are horizontal, you might use them as support and resistance lines in the same way. If they are diverging, it is not a fun time to trade. Wait for a trend to form.
If the lines are converging, they might point to a breakout. In this example you should not treat the lines as support and resistance lines but wait for the price to go beyond either of them and continue in that way. So if the price breaks above the higher line you would buy, expecting it to resume in that direction for a bit. Equally, if the price breaks above the lower line, you would sell.
Like all currency exchange techniques, these aren’t assured. There’s always a risk of trades going against you, so you check your signals against other indicators and always use stop losses. Always try the system in a demo account before going live. These steps will help you to develop a successful foreign exchange trading plan.
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