An essential part of any trader’s foreign exchange trading education is learning to spot trends. This is your signal that the market is making a sustained move, either up or down, and you can gain from it by opening a trade. The famous exclaiming ‘the trend is your friend’ is at the heart of this strategy.
Using trends to profit from currency trading may seem almost too easy. Yes, it is a easy strategy, but it works… Provided you can tell the difference between a developing trend and a mere fluctuation. That is where the ability, experience and tools come in. But actually it’s a very simple methodology and you shouldn’t try to complicate it.
There are several alternative ways of identifying a trend using either technical research (charts and indicators) or market information (fundamental research). Drawing trend lines on a candlestick chart is perhaps the most straightforward system. You can identify triangle patterns that may envision a breakout in one direction or the other, and check these against other indicators like the MACD crossover. It is also wise to test your pattern on charts for different periods, e.g. Check hourly against daily charts for example.
There is not any have to know all the different techniques for spotting a trend. Perfect one or two reliable techniques and you have all you need to make money. Remember that all methods have their successes and their screw ups, and it’s the overall profit or loss over the long run that counts. Do not be put off by one failure, and control your risk so that 2 losses in a row will not have a big effect on your funds or on your confidence.
