Forex Trading Technique: The Trend Is Your Buddy
It is well known in the currency trading world that the trend is your friend and any foreign exchange trading strategy based around following a trend, such as No Loss Robot, is probably going to be both simple and effective.
It is really easy to form trend lines on any foreign exchange chart, but most people prefer to use candlestick charts for this as the candlesticks are such a clear visible signal. When trend lines are forming, you can use them as a signal to sell or buy the currency pair.
Step one in using trend lines for acurrency exchange currency} trading strategy is to ascertain whether the market is rising, falling or is stable within certain parameters. Naturally there will 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 through the lowest lows on the chart. If this line is also going upward and is approximately 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 could sell, on the assumption that it'll fall back. In a way this strategy means going against the trend, but you would only hold that position for a short time.
otherwise, any time the price hits the final analysis you might buy, on the assumption that it will shortly rise again. In this example you follow the trend which is often a better methodology. However, you may remember that there will at some particular point be a true reversal and you could be caught out by this.
2. If the price is falling
If the price is going down, you can follow a corresponding methodology to the prior 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 isn't going anywhere, then the lines that you draw thru the highest highs and the lowest lows will either be horizontal and parallel to one another, or they will be converging ( drawing closer together ) or diverging ( drawing apart ). If they're horizontal, you might use them as support and resistance lines in the same way. If they are diverging, it is not a good time to trade. Wait for a trend to form.
If the lines are converging, they can indicate a breakout. In this case you shouldn't 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 upper line you would buy, expecting it to continue in that way for a while. Equally, if the price breaks above the lower line, you would sell.
Like all forex strategies, these aren't assured. There is always a chance of trades going against you, so you should 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 currency trading strategy.
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