Forex Trends - How to Follow Them for Bigger Profits
Written by OnlineLoan on 22:05Forex Trends - How to Follow Them for Bigger Profits
By: Monica Hendrix
When you look back at a forex chart forex trends that last for weeks or months are easy to see but there much harder to hold in real time trading. There are huge profits to be made if you can milk the longer term trends but you must be aware of two main problems you will encounter.
Volatility within the Main Trend
When your are forex trend following you get constant pullbacks in price and you have to decide whether they are a trend change or a pullback and this is not so easy when money is on the line.
The dilemma you face is: Where should you put your stop so that you can stay with the trend but get at least a good chunk of profit should the trend turn.
For this you should have an understanding of standard deviation of price - if you don't know what it is - make it an essential part of your forex education.
Our view is to use trend line support and moving averages pullbacks to the 18 - 25 day moving average are normal and pullbacks to the 40 day moving average indicate a trend that might turn.
Once the trend is in motion, use the 40 day and trend line support as your stop.
Of course when the trend turns you give back a bit of profit but that's ok - if you caught 50% of every major trend, you would be very rich.
Don't ever try and predict when a trend might end or impose your view on the market let the market action tell you when you are wrong.
You Have to Accept Short Term Dips to Make Long Term Gains!
Many traders get excited when they get a profit and the bigger it becomes, the more excited they get - Every dip in open equity causes them emotional turmoil and they simply want to get the profit in the bank, before it gets away.
They end up snatching their profit and banking a marginal one - what happens next?
The trend continues and makes $5 10 or 15,000 and their not in yet, that's where they thought the price was going anyway!
They just didn't have the discipline to stay with them.
The fact is you must be disciplined and be prepared to take open equity dips - sometimes of thousands at a time, once a big trend is in motion.
This requires confidence and discipline in your forex trading strategy, an understanding of volatility and a mindset to put up with it, to seek a longer term gain.
Take a look at a forex charts and you won't just see trends at present that yield a few hundred pips in motion, you will see ones that could give you thousands or tens of thousands and you can get these trends with the right attitude.
If you have the discipline and the mindset to succeed you can make a lot of money from long term trends - you don't have to be perfect and you and you don't have to be clever, just have the patience to stay with the trend, until the chart tells you that your wrong.
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