You may have heard of this frequently in some Forex trading tutorials, ‘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.
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? Yes, 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.