Trend Following Forex, 3 Simple Steps to Catching Big Profits
June 23, 2009 by admin
If you want to catch the big profits in forex trading you need to trend follow forex trends which are longer term. Here we will give you a 3 step simple method which if you use it correctly, will help you catch every major forex trend and lead you to long-term currency trading success.
Most novice traders do not bother trying to trend following forex long term - instead they try forex Scalping or day of trading. These methods focus the trader on small steps and hope to catch small gains, however, that most short-term movements are random, which leads to equity wipe out.
The other options are swing trading and long term forex trend following and this article deals with the latter method. If you look at any forex chart, you will see long-term trends that last for months or years. These measures can and do not give huge profits - here we will describe a simple method to catch them.
Break Outs
The absolute best way to catch the big step is to use a forex trading strategy is based on break outs. A breakout is just one step on a forex chart where a new high or low is made and the resistance or is defective.
It is a fact that most major features are starting from new peaks or valleys.
Although it might seem that you do not buy or sell at the best level, you are in the form of odds of the trend continuing. Most forex traders make the mistake of waiting for the breakout to come back and get a better price, but these traders never on board. The reason for this is if a breakout occurs, you have a strong new trend and a pull back is not very likely to occur.
Most traders do not buy or sell any break outs and it is precisely because it is such a powerful method.
The only point to keep in mind is the support or resistance is broken should apply and that means at least 3 points in at least 2 different occasions frames. The more testing and greater distance between the tests the more valid they are.
Confirmation
Of course not every breakout continues, and some backward these are false and can cause losses. You must confirm each move. All you need to do to achieve this is to ask some momentum indicators in your forex trading system to confirm your trading signal.
These indicators provide a picture of strength and speed of the price and there are many to choose from. We do not have time to discuss them here (just look up our other articles), but two of the best are - the stochastic and Relative Strength Index RSI
Stops and targets
Stop is easy with break outs - Simply behind the breakout point.
If you have a big trend, you must be careful you can milk, so do not move your stop too quickly and keep it outside of normal volatility. If there is a big move, closing stops should be kept a long way back and the 40 days moving average is a good level to use.
You must keep in mind that when the development is eventually turn you will give back some profits. You do not know when the trend is to end, so do not anticipate.
It is ok to give a great back, which is the type of trading forex. Remember, if you got 50% of all the major trend, you will become very rich. When you are long-term trend after you have received to give a little back and swim in the open capital development trend - it is noise and does not affect the long-term trend.
The above is a simple way to trend follow forex and capture high odds move that gives the biggest gains. If you learn forex trading and want a simple method which is robust and will help you catch every major road, you should base the Trading of the above method.