Trading Forex Using Trends
There are a lot of different forex trading systems out there for new traders to choose from. One of these strategies is to use the trends in the market when trading forex. This trend trading strategy works well for new traders because of the ease of identifying a trend. Of course, you need to know about how to identify trends and how to successfully trade on them.
Trading Forex Using The Trend System
You may wonder why you should look at the trading forex using trends instead of one of the many others. The fact is that this system is based on the very basics of forex training and knowledge. Trends are something that every trader is taught to identify and predict. In fact, most forex tools are designed to look at the trends of currencies. This means that you will always be able to find information to use for your system.
The Different Trend Systems
When you are trading off of a trend there are two systems that you can use. The first is trend following and the second is counter trend following. It is recommended that any new trader use the trend following system. The counter trend following system is often bets left to more experienced traders.
Following the Trend
As the name might suggest this system is all about following the trend of the currency and using that as your system. When you are using this system it is important that you utilise real time charts and information. You should also take the time to place stop limits on your trades should the trend move in an unpredicted manner.
When using the trend following system you should buy low and sell high. This is the base of the entire system. You also need to see what other traders are doing. If they are selling their currency then you should consider selling you currency as well. This method is also about going with the crowd when you trade. The risk is limited with this system as you are trading with the trend and generally the information you are able to get is quite reliable.
Of course you should not rely on information from other people. Before you trade you need to find a chart of the currency you are looking at. See what has been happening for the last few hours or day depending on the time frame of your trade. You should take note of the highs and lows and set your stop points at certain highs and lows. If the trend for a currency has been declining you should see how far the decline is. If it has reached a certain level it can only go up and you should be ready for when this happens.
Trading Against the Trend
The counter trends system works in the opposite way of the trend following system. With this method you are actually trading against the crowd. This is very risky and that is why it is left to the more experienced traders. Trading against the crowd is a more long term plan and needs to be done at the right time.