When you first look at forex trading strategies you should look at ones that work off a trend. These forex trading strategies are ideal for new traders because trends are generally easier to trade on. Of course, there are a number of points you have to look at when you trade with the trend. You have to consider how your forex trading strategy is going to determine the trend, when you should be entering and when you should be exiting the market. All of these factors are very important when you look at trend trading.
Is Trend Trading Really for Beginners?
New traders always have to be careful when they look at forex trading strategies. There are a lot of strategies that are not suitable for new traders because of the concepts and risks they take. There are some new traders who wonder if trend trading is really right for new traders.
This question generally comes from seeing information stating that it can be hard to determine a trend. While there are times when the trend does not seem easy to find there are tools and techniques that you can use to help. It is important that you know what some of the tools and techniques are and how they help you trade.
Identifying the Start of a Trend
When you look at trend trading you have to know how to identify the start of a trend. There are a number of ways that you can do this from fundamental analysis to chart patterns. Of course, most forex trading strategies will have certain tools that they use to determine the trend. Before you consider using the strategy you have to see what these methods are and whether or not you are comfortable with them.
With fundamental analysis you are unable to find the exact entry points for a trade. The long-term strategies that use this for trend determination generally do not look at exact points for entry and exit. You have to deal with a vague entry points and a vague exit point.
With technical analysis you are able to use a range of technical indicators to help with trend identification. Some of the most common tools will be the moving average, pivot points and Bollinger bands. You should also use a verification tool to determine if this is a trend or just a partial movement.
There are certain chart patterns that help you determine what the market is going to do. These patterns can tell you if the trend is going to continue in a single direction or if it will reverse. Some of the common patterns are triangles and engulfing candles.
The End of a Trend
There are a lot of traders who have a harder time determining the end of a trend. This is due to retracements having many of the same characteristics as reversals. When a trend retraces it will turn in the opposite direction for a limited period of time before continuing in the original direction. You have to know how to differentiate a retracement from a reversal. Some traders state that this is something you learn with time. However, there are other traders who state that there are chart signs that tell you whether you are looking at a reversal or a retracement.
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