ForexEzy
No Result
View All Result
  • Top Forex Advisors
    • Best Forex Robots
    • Best Forex Signals
    • Best Managed Accounts
  • Top Forex Brokers
    • Best Forex Brokers
    • US Forex Brokers
    • UK Forex Brokers
    • MT4 Forex Brokers
    • MT5 Forex Brokers
    • Zero Spread Brokers
    • Best PayPal Brokers
    • TradingView Brokers
    • Social Trading Platforms
  • Top Review Platforms
  • Forex Education
    • Getting Started
    • Forex Basics
    • Forex Trading Strategies
    • Money Management
    • Risk Management
    • Technical Analysis
    • Fundamental Analysis
    • Trading Psychology
    • Social Trading
    • Automated Trading
  • Forex Tools
    • Forex Robots
    • Forex Indicators
    • Forex Signals
    • Forex VPS
  • Forex Forecast
  • Crypto
    • Best Crypto Exchanges
    • Best Crypto Bots
    • Crypto Guides & Forecasts
  • Top Forex Advisors
    • Best Forex Robots
    • Best Forex Signals
    • Best Managed Accounts
  • Top Forex Brokers
    • Best Forex Brokers
    • US Forex Brokers
    • UK Forex Brokers
    • MT4 Forex Brokers
    • MT5 Forex Brokers
    • Zero Spread Brokers
    • Best PayPal Brokers
    • TradingView Brokers
    • Social Trading Platforms
  • Top Review Platforms
  • Forex Education
    • Getting Started
    • Forex Basics
    • Forex Trading Strategies
    • Money Management
    • Risk Management
    • Technical Analysis
    • Fundamental Analysis
    • Trading Psychology
    • Social Trading
    • Automated Trading
  • Forex Tools
    • Forex Robots
    • Forex Indicators
    • Forex Signals
    • Forex VPS
  • Forex Forecast
  • Crypto
    • Best Crypto Exchanges
    • Best Crypto Bots
    • Crypto Guides & Forecasts
No Result
View All Result
ForexEzy
No Result
View All Result
The World’s Leading Social Trading Platform
Try now
Home Forex Education Forex Trading Strategies

Should You Trade With the Trend?

by Chintan Patel
April 29, 2021
in Forex Trading Strategies
0
Should You Trade With the Trend?
0
SHARES
11
VIEWS
Share on FacebookShare on Twitter

The trend is your friend is a famous analogy that traders are constantly brainwashed with. A small portion of strategies focuses on reverse setups in the trading world, while most include following the masses. Over time software developers have made various EAs and indicators that work with the market’s overall direction or provide information on where the price is going. Our article will discuss what trend trading means and highlight a few drawbacks of this system.

The Best Forex Robots Report Is Already Here!
best forex robots
Check out 30+ best expert advisors with daily updated live results and statistics
Click Here

An overview of the trend

In technical analysis, a trend forms when the market consistently makes higher highs and lows or lower highs and lows in the same direction. It rhymes with the concept of Elliot wave analysis and Fibonacci intervals. 

A trader plots Fibonacci to point out significant retracements. The overall trend in this chart for a short interval is on the downside. Trendlines help our cause.

Image 1. A trader plots Fibonacci to point out significant retracements. The overall trend in this chart for a short interval is on the downside. Trendlines help our cause.

For an instrument to flow perfectly in one direction, it must not cross 100% retracement on the Fibs. Any activity of such sort will lead to the break of structure and point to the reversal in the trend direction.

In our previous example, we were able to identify the downtrend by looking at the breaking point of the structure. As soon as the price crosses the black line, we look for short trades in case of trend trading.

Image 2. In our previous example, we were able to identify the downtrend by looking at the breaking point of the structure. As soon as the price crosses the black line, we look for short trades in case of trend trading.

Trend based strategies and their advantages

Game plans based on trends provide a good risk to reward ratio and winning percentage. 

Buying the dips

A notorious strategy involves placing buy orders on the respective retracement on the Fib levels. For further confirmation, traders also use candlestick patterns. The stop loss lies beneath the 100% or 0% Fibonacci. The most common points of retracements are 38.2%, 61.8 and 88%. 50% does not provide sufficient proof on either side as the market can go both ways.

For a current uptrend, the Fibs can be drawn from bottom to top. Customize the retracement values according to your liking.

Image 3. For a current uptrend, the Fibs can be drawn from bottom to top. Customize the retracement values according to your liking.

Using indicators

Indicators such as moving averages, Ichimoku cloud, MACD, etc., can provide good information about the current trend and its strength. MAs that point in an upward direction relate to an uptrend and vice versa. Using multiple indicators to provide confirmation, a trader can get a good trading setup with ease.

The moving average crossover indicates a shift in the current trend where the MACD prints green bars showing strong bullish momentum. Trading alongside the current trend, we have an opportunity with a good risk/reward of 1:2.

Image 3. The moving average crossover indicates a shift in the current trend where the MACD prints green bars showing strong bullish momentum. Trading alongside the current trend, we have an opportunity with a good risk/reward of 1:2.

Reversal points

It is also possible to predict the points where the market will likely take in reverse gear. We utilize Fibonacci intervals here again and use corresponding levels of -27% and -61.8%. This we can catch both sides of the trend, making easy pips. 

Using the previous chart, we plot the Fibs for our downtrend. The respective levels are available on the price action.

Image 4. Using the previous chart, we plot the Fibs for our downtrend. The respective levels are available on the price action. 

Broad application

Trends are the byproduct of fear and greed, which pushes the market in their respective direction for a long duration. The short-term reversals are due to the profit taking by banks or investors. As the buying or selling is at par with all instruments, trend trading takes on broad application. Treasury bonds, indices, futures, forex, stocks, etc., all follow the same path.

Time frames

Traders can observe trends on different time frames, including weekly, daily, H4, M15, and M5. As there are several modifications solely based on periods, trends help in applying various trading styles such as scalping, day, and swing trading. However, keep in mind that price movements on bigger charts will always prevail in terms of trend.

Exact timing

While trading with the trend, even if you are wrong in your analysis and making a lousy entry, your execution’s overall outcome will still be positive. The market will soon move into your favor and result in a breakeven at a worst-case scenario.

Even if a trader gets a slightly wrong entry and experiences a little drawdown, the market ultimately turns in his favor. Some participants may take more entries as the price moves against them. This form of trading is called market making and is popular amongst hedge funds and institutions.

Image 5. Even if a trader gets a slightly wrong entry and experiences a little drawdown, the market ultimately turns in his favor. Some participants may take more entries as the price moves against them. This form of trading is called market making and is popular amongst hedge funds and institutions.

A few demerits

We can observe the following disadvantages while following trend trading:

  • Fake outs. The chances that a trader will be stuck identifying major trends is high as the markets are consolidating for a significant duration. Breakouts from the support and resistance can lead to fakeouts as the price is determined to stay within the range.
  • Lagging. For some market participants, trend trading might be lagging. A moving average is one of the lagging indicators. MA crossover strategy is not good enough for catching the complete move in its initial stages.
  • Riding trends are hard. Riding a complete wave with its ups and down demands a ton of psychological effort from the trader. The investor must show a proper mindset and ability to get out of the position at the exact ending point of the trend.

End of the line

Trend trading indeed comes with a lot of benefits for traders. However, alongside any strategy, a trader must represent sound risk management and emotions to implement it properly. Beginners who are stuck with consistency should try and include this form of trading. It can improve your output by a good margin.

The Best Forex Robots Report Is Already Here!
best forex robots
Check out 30+ best expert advisors with daily updated live results and statistics
Click Here
ShareTweet
Previous Post

Market Volatility During Different Days

Next Post

BigExpert Review

Related Posts

Best 5 Leverage Calculators Use Can Use for Free

Best 5 Leverage Calculators Use Can Use for Free

by Chintan Patel
May 30, 2022
0

Leverage is an important concept in forex and stocks trading. It refers to the amount of money that a broker...

KeyDifferences Between the Simple and Exponential Moving Averages

KeyDifferences Between the Simple and Exponential Moving Averages

by Chintan Patel
April 18, 2022
0

Moving Averages (MAs) are often the first indicator introduced to a newbie in any financial market. They remain the bread-and-butter...

Best Strategies for Trading the Japanese Yen USDJPY

Best Strategies for Trading the Japanese Yen USDJPY

by Adam Stanley
April 6, 2022
0

The Japanese yen is one of the most popular currencies globally because of the position of the country’s economy. Japan...

Best Strategies for Trading the Swiss Franc USDCHF

Best Strategies for Trading the Swiss Franc USDCHF

by Chintan Patel
April 4, 2022
0

The Swiss franc is a popular currency around the world today. It is often viewed as a safe-haven currency because...

How to trade using Larry Connor

How To Make Money Using 2-Period RSI Strategy

by Adam Stanley
February 16, 2022
0

2-Period RSI strategy is a common trading strategy that traders and forex expert advisors leverage to squeeze profits while trading...

Load More

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Best Forex Automated Systems

  • TechBerry 9/10
  • Happy Galaxy 8.5/10
  • Forex Cyborg 8.5/10
  • Forex Fury 8/10
  • FXgoodway 7.5/10
  • Best Forex Brokers
  • Best Forex Robots
  • Best Forex Signals
  • Best Forex Managed Accounts

Top Trading Markets

We are dedicated to demystify the world of forex trading for you – no matter what level you are on.

Categories
  • Automated Trading
  • Crypto Robot Review
  • Cryptocurrency Trading
  • Day Trading
  • Forex Basics
  • Forex Brokers
  • Forex Education
  • Forex Forecasts
  • Forex Indicators
  • Forex Market Commentary
  • Forex Robots
  • Forex Signals
  • Forex Signals
  • Forex Tools
  • Forex Trading Strategies
  • Forex VPS
  • Fundamental Analysis
  • Managed Accounts
  • Money Management
  • News
  • Review
  • Review Platforms
  • Risk Management
  • Social Trading
  • Technical Analysis
  • Top World Traders
  • Trading Apps
  • Trading Psychology
  • Uncategorized
Tags
Acquisition AI Amazon Apple Artificial Intelligence Bitcoin bond yields CEO China earnings earnings report economy Electric Vehicles Federal Reserve financial performance Financial Results forex ea forex software reviews Growth Guidance Housing Market inflation interest rates Investing investment Investors Market Volatility merger mortgage rates net profit Nvidia Oil prices Q2 Results revenue Revenue Growth Sales sales growth Stock Futures stock market stock performance Stocks strategies technology Tesla Video
  • Terms of Use
  • Privacy Policy
  • Compensation Disclosure
  • Risk Disclosure
  • About Us
  • Contact Us

Copyright © 2023 by ForexEzy.com

No Result
View All Result
  • Top Forex Advisors
    • Best Forex Robots
    • Best Forex Signals
    • Best Managed Accounts
  • Top Forex Brokers
    • Best Forex Brokers
    • US Forex Brokers
    • UK Forex Brokers
    • MT4 Forex Brokers
    • MT5 Forex Brokers
    • Zero Spread Brokers
    • Best PayPal Brokers
    • TradingView Brokers
    • Social Trading Platforms
  • Top Review Platforms
  • Forex Education
    • Getting Started
    • Forex Basics
    • Forex Trading Strategies
    • Money Management
    • Risk Management
    • Technical Analysis
    • Fundamental Analysis
    • Trading Psychology
    • Social Trading
    • Automated Trading
  • Forex Tools
    • Forex Robots
    • Forex Indicators
    • Forex Signals
    • Forex VPS
  • Forex Forecast
  • Crypto
    • Best Crypto Exchanges
    • Best Crypto Bots
    • Crypto Guides & Forecasts

© 2023, Forexezy. {copy} {year}