If you have been wondering which trading strategy is the most popular among Forex traders, the answer would be the trend trading strategy. It is the go-to trading method when you are uncertain as to which approach to take or you are simply confused by the other options out there. Forex trend trading strategy is easy to learn and very straight forward. It is suitable for beginners but many professional traders swear by it as well.
Trading with a strategy can really help you out because it is simply impossible to trade by using lucky chances. Keep in mind that finding a strategy that will make you come out as a winner each and every time is impossible. Once you know what to focus on and keep a track of, you will become more successful and profit in the long run.
Trend Strategy: the Basics
Forex market is volatile and you are probably already aware of that. Spotting a trend and following its direction is exactly what you need to do if you want to start with a Forex trend trading system. When you take a look at a chart, you will see that a trend is usually presented as a single line with uptrend and downtrend signals beside it. Keep in mind that trends can shift and change pretty quickly and you should be ready to act fast if needed.
Once you are certain that for whatever economic reason, whether it is a current event, a news release, or something completely different, the trend is going strong and to your advantage, you have to act swiftly and get on it. Preparing a solid trend trading strategy should be fairly easy for every trader who is actively trading in the market.
The essential ingredient in trend trading Forex strategy should be the technical analysis. You need to pay attention to the history and past performance of a trend you are following. There are other indicators that might be useful when you are trying to spot a trend such as analyzing smaller time frames in detail and detecting a trend that might be going up early on. All in all, combining technical with fundamental analysis might be the best possible approach to trend trading strategy.
Fundamental analysis can do wonders as well when it comes to trend trading strategy. We have already mentioned that trends might go up or down due to a global event of some kind or an economic data release. This type of analysis can tell you when a trend might change and how long that change will last. On the other hand, combining it with the technical analysis will provide you with a more complete view and show you exactly how a trend is developing in the market.
Additional Help in FX Trend Trading Strategy
FX trend trading system can be simplified and there are plenty of different software and trading tools you can use in order to detect a trend and be notified if it’s an uptrend or a downtrend. But sometimes these types of trading tools might give you a false alarm so it is recommended that you check out the charts for yourself before you enter a trade and make sure that the movement is truly happening.
The overall goal of this trading strategy is to do it over a longer period of time and therefore placing a stop-loss order right away might not be the best option. But if you insist of having one, you should put it near the trend line and make sure it is not triggered by daily movements. Always remember that you are not on the lookout for the short-term movement and tiny changes are bound to happen to a trend during a single trading day.
In the end, you will make profit if you catch on early to a certain trend, follow it as far as it goes and then exit a trade. We have already talked about the usefulness of knowing what made a trend go in a certain direction, and once that reason is out, it is your cue to exit.
FX Trend Trading Strategy: Conclusion
Trend trading FX strategy is certainly very popular in the market right now just as it was decades before. Plenty of extremely successful traders have used it in order to gain a fortune and it is clear why many experts recommend using trend trading. However, we need to point out that it is a long-term strategy and it will not make you rich overnight. Just like with everything you do in your life, trend trading strategy requires plenty of patience, iron will, and readiness to act quickly at any given time.