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Forex Trend Following - How to Catch and Turn the Big Trends Into Big Profits
from: kelly PriceIf you look at any forex chart you will see big trends which last for many weeks, months or years and it is these trends that yield the big profits. Forex trend following looks easy but it's not as easy as it looks unless you understand these key points. Understand them and you can enjoy currency trading success...
Why Big Trends Will Always Occur
They will always occur, because currencies reflect the underlying health of the economy of the country they represent and boom and bust cycles are long term and reflected in currency strength and weakness.
Currencies will always exhibit long term trends.
If you can lock into and follow these forex trends, you can of course make a lot of money but most trader's don't have the discipline to do it - if you do with your forex trading strategy, then you can make huge profits. Making big profits is never easy and you wouldn't expect it to be with the rewards you can make but if you follow the right methods you can make triple digit annual gains.
Let's look at how to forex trend follow and catch these major trends.
Hit the Breakouts
If you understand how to buy and sell breakouts you can catch the big trends that yield the big moves and it's a fact that ALL major trends come from breakouts of important market lows and highs and you should look to buy them.
Generally, an important breakout will be at least 3 tests of a level, in two times frames and the wider they are spaced apart the better. The more tests the more time frames and the wider they are apart the more important the level is and you will find a few of them per year in each currency.
They don't come around often but the odds favor a major trend when they do and you should have patience to wait for them.
Keep in mind you don't get rewarded for trading often - you get rewarded for being right with your trading signal and market timing - that's all, not how often you trade.
Following the Trend
This is the hard part and the one that most traders cannot do, because they cannot take open equity dips against them - you need courage to follow these forex trends and hold them and here we will show you how.
Most traders get excited when they get a profit and the bigger it becomes the more excited they get. As normal volatility dips back and starts to eat into open equity, they get frightened and want to take the profit before it gets away, the more this happens, the more nervous they get. In the end, they simply cant take it anymore and snatch a marginal profit or move stop to close and get bumped out. What happens next?
The trade continues the way they thought and piles up $10, 20,000 or more and there not in!
If you are in a big trend, accept short term open equity drawdown as part of catching the bigger longer term profit and don't move your stop to soon! Simply wait till the trade is underway and leave your stop outside of short term volatility, say at the 40 day moving average when the trend turns, you will lose a bit but this method can make you tens of thousands on the big trends.
Always remember - if you caught just 50% of every major trend, you would be very rich!
Forex trend following suits the trader who wants to make big money and spend less than 30 minutes a day on their trading - if you like the buzz or action do something else.
If you have courage, conviction and patience, you can make triple digit gains using this method and it's one where if you hit the right trends they can provide stunning long term profits.
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