Understand what a Forex Trend is
It is important for you as a forex trader to identify and understand a trend in currency markets because they tend to be vicious and one way. Trends in forex routinely wipe out retail traders like you and me who commit the sin of trend fading.
FX trends start slowly and are usually the result of another action taking place in the global capital markets. A booming stock market like that happened in the Tokyo Stock Exchange some years back may lead to a massive forex trend in its wake as an example.
Similarly, a global recession may force investors to take refuge in save haven currencies like dollar in their flight towards safety. Likewise, decrease in interest rates will force carry traders to become risk averse.
So you will need to keep an eye on the global macro situation to look in which direction smart money is flowing. As most of the trends in forex markets are fundamentally driven by the flow of smart money.
The longer the trend is going to be, the longer the correction and the consolidation will be. In other words, fundamentally driven trends do not take sudden U-turns.
But when the general public realizes that a trend has developed, it is always too late for them. Professional traders and hedge fund have long been in the trade and are ready to dump their positions on the retail crowd.
As the saying goes, a Newsweek cover is a kiss of death for a trend. Trends are important for an individual investor to understand.
Remember trend is your friend. Trend trading is one of the most popular trading strategies employed by professional traders including hedge funds.
The best strategy is to take a position in the direction of the trend. You can easily identify a trend in currency markets using multiple time frame analysis involving moving averages.
Once you have the trend identified, use Fibonacci retracement levels to enter and exit the trade. If you successfully execute this strategy, you can make a few hundred pips in a week. - 23211
FX trends start slowly and are usually the result of another action taking place in the global capital markets. A booming stock market like that happened in the Tokyo Stock Exchange some years back may lead to a massive forex trend in its wake as an example.
Similarly, a global recession may force investors to take refuge in save haven currencies like dollar in their flight towards safety. Likewise, decrease in interest rates will force carry traders to become risk averse.
So you will need to keep an eye on the global macro situation to look in which direction smart money is flowing. As most of the trends in forex markets are fundamentally driven by the flow of smart money.
The longer the trend is going to be, the longer the correction and the consolidation will be. In other words, fundamentally driven trends do not take sudden U-turns.
But when the general public realizes that a trend has developed, it is always too late for them. Professional traders and hedge fund have long been in the trade and are ready to dump their positions on the retail crowd.
As the saying goes, a Newsweek cover is a kiss of death for a trend. Trends are important for an individual investor to understand.
Remember trend is your friend. Trend trading is one of the most popular trading strategies employed by professional traders including hedge funds.
The best strategy is to take a position in the direction of the trend. You can easily identify a trend in currency markets using multiple time frame analysis involving moving averages.
Once you have the trend identified, use Fibonacci retracement levels to enter and exit the trade. If you successfully execute this strategy, you can make a few hundred pips in a week. - 23211
About the Author:
Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading and swing trading stocks and currencies. Know These Forex Broker Games. Try Netpicks Forex Signals Free.
posted by X - Men @ 4:28 AM
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