How to use Trend Following Strategy ?
In financial markets, one of the most famous long-term strategy is trend following. When there are favorable conditions, trend following is really effective as well as profitable. It is quite simple in its methods, and there have been many users – old and young – well-known and commoners who have gained both success and fortune by using this technique. The first major thing that trend following requires is discipline, proper money management and tolerance from the trader. As trend following is a long-term method, tolerance and will power are as useful as proper analysis as an result.
Potent fundamental economic factors make up the trend though it may not be clear to those who are not known with basic analysis. The simple patterns produced by price action in answer to the economic events can be identified by methods which can be easily learnt and applied. So the trader is going to succeed as much as the most skilled analyst if he is able to gain control over his emotions and work rationally.
Now, we will use dialogue between the thriving trader and the novice, so that the principles would be easier to understand.
B: Will you be trying to time the market? I heard that this never works.
T: When a person on technical basics is trying to forecast the reversal points, then the marketing time do not works. Nevertheless timing the market in circumstances of trend with picking purposes of counter-trend limits and to enter a trade by using them, is essential and money-making. And these are the main aspects of trend following: classify the trend, discover counter-trend movements, and start a trade by using these in the path of the trend.
B: How much longer must the trend follower is maintaining his position?
T: They will maintain it forever or when to be exact as long as the basic reasons that make the trend are central. If the writer either if he is unwilling or doesn’t believe in them or for some deeper reason, he cannot find those reasons then in order to time the exit point he can use technical patterns. If the trader is even aware of the basic factors, and can assess them properly, he can still be provided with a helpful early warning mechanism by the technical analysis. The trader can use technical signals to reassess and reconsider its fundamental picture when the price action is strongly telling that there is some error in the trader’s fundamental outlook.
B: For moving average, what time frame will you suggest?
T: The 100-day MA will most likely hold most of the useful trends i.e. if you will be trading on either weekly or daily basis. Anything having longer time duration will probably be pointless as of large data being disposed, and anything which is having less than 100-day time duration may be susceptible to price action. However, timeframes lower than 100 could be used, if the he doesn’t mess his display with indicators, charts or tools.
Therefore we can say that trend following is one of the most easiest and straightforward way to make money from forex market. But for successful trading, the forecast given by the analysis and patience in which confidence is required. People who use quick revenue and instantaneous ratification will rather find this uninspiring. But it’s most consistent and will give great results if you give it a chance.
How to trade trend trading strategy ?
Step one : Pick right currency pair. You can take from dailyfx.com tables like this where you can see for each week which currency pair is good for trend trading :
Step 2 : Draw Fibonacci lines to get entry and target targets :
See videos :