Forex Trading Technique: The Trend Is Your Friend

It is widely recognized in the currency trading world that the trend is your friend and any currency trading strategy based around following a trend, such as No Loss Robot, is likely to be both straightforward and effective.  

It is very easy to make trend lines on any foreign exchange chart, but most folks prefer to use candlestick charts for this as the candlesticks are such a clear visible signal. When trend lines are forming, you can use them as a signal to sell or buy the currency pair.

Step one in using trend lines for a {foreign exchange currency} trading plan is to determine whether the market is rising, falling or is stable within certain parameters. Naturally there’ll always be fluctuations, but at particular times you’ll see clear patterns.

one. If the price is going up

If the price is going up, first draw a straight line through the highest highs on the chart. This line will be sloping upward. Then draw another line thru the lowest lows on the chart. If this line is also going upward and is approximately parallel to the first, you’ve got an upward trend.

You can then use these 2 lines as support and resistance lines. This means that you can assume that while the trend continues, the price will remain in the area between these 2 lines. any time the price hits the top line you could sell, on the presumption that it will fall back. In a way this strategy means going against the trend, but you would only hold that position for a short while.

otherwise, any time the price hits the base line you might buy, on the assumption that it’ll shortly rise again. In this situation you follow the trend which is commonly a better method. However, you should remember that there will at some point be a real reversal and you may be caught out by this.

2. If the price is falling

If the price is going down, you can follow an analogous methodology to the previous system. The lines you draw will be going downward but you’d still buy when the price hits the lower line and sell when it hits the upper line.

3. If the price is stable

If the price isn’t going anywhere, then the lines that you draw through the highest highs and the lowest lows will either be horizontal and parallel to one another, or they’re going to be converging ( drawing closer together ) or diverging ( drawing apart ). If they are horizontal, you could use them as support and resistance lines in the same way. If they’re diverging, it is not a good time to trade. Wait for a trend to form.

If the lines are converging, they might point to a breakout. In this situation you should not treat the lines as support and resistance lines but wait for the price to go past either of them and continue in that way. So if the price breaks above the higher line you would buy, expecting it to resume that way for a while. Similarly, if the price breaks above the lower line, you would sell.

Like all currency exchange strategies, these are not guaranteed. There’s always a risk of trades going against you, so you should check your signals against other indicators and always use stop losses. Always test your system in a demo account before going live. These steps will help you to develop a successful forex trading strategy.