eToro – Forex Trading Forum

[djsheckie]

If you want to reel in nice profits with your trading, then you’ll need to follow longer term forex trends. Don’t know how? No worries I’ll give you a 3 step simple method which if you use it correctly, will help you catch most major forex trends and help you attain long term forex trading success.

Unfortunately, most novice traders don't bother trying to trend following forex longer term - instead they try scalping or day trading. These methods revolve around focusing on smaller moves and by keeping tabs on these smaller moves traders hope to turn a profit by catching small fluctuations. However, as most short term moves are random, this can lead to fast losses.

[djsheckie]

As far as other choices forex trading choices go you have both swing trading and long term forex trend following. This post is all about the latter method. If you look at any forex chart, you will see long term trends that last for months or years. These moves can and do yield big profits - here we will outline a simple method to catch them.

Watch for Breakouts

Undoubtedly the best way to catch one of the big moves is to use a forex trading strategy based around breakouts. A breakout is simply a move on a forex chart where a new high or low is made and resistance or support is broken.

[djsheckie]

It's widely known that most of the big moves start from new highs or lows.

While it might seem that you’re not buying or selling at the optimum level, your odds of the trend continuing are. Most forex traders make the mistake of waiting for the breakout to come back and get in at a better price but these traders never get on board. The reason for this is if a breakout occurs, then you have a new strong trend and a pullback is not very likely to occur.

Most traders don't buy or sell breakouts and that's exactly why it's such a powerful method.

[djsheckie]

The key point to keep in mind is a that a broken support or resistance, should be valid and that means at least 3 points in at least 2 different times frames. The more tests and the wider the spacing between the tests the more valid the level is.

Confirmation of the Trend

However, not every breakout will continue and in fact some actually reverse, these are false and can cause losses. You therefore need to confirm each move. All you need to do to achieve this is to put a few momentum indicators in your forex trading system to confirm your trading signal.

[djsheckie]

These indicators that will give you a better idea of the strength and velocity of price. There are plenty of indicators you can choose from, but I don't have time to go through each one now. Perhaps in a future article I can. However, two of the best indicators are the stochastic and the RSI or Relative Strength Index.

Finding the Stops and Targets

Stop levels are easy to detect with breakouts. They are just behind the breakout point.

If you have a big trend then you'll need to be careful. You can squeeze it, so don't move your stop to soon and keep it outside of normal volatility. However, if it is a big move, trailing stops should be held a long way back and the 40 day moving average is a good level to use.

[djsheckie]

You have to keep in mind that when the trend does eventually turn you are going to allow yourself to lose a bit of profit. You don't know when the trend is going to end, so don't try and make guesses or predictions.

It's ok to to lose some money, as that is part of the nature of trading forex. Keep in mind even if you got 50% of every major trend you would be very rich. When you are long term trend following you have accept giving a bit back and taking dips in open equity as the trend develops - this is noise and does not affect the long term trend.

The above is a simple way to trend follow forex and catch the high odds moves that yield the big profits. If you are learning forex trading and want a simple method that is robust and will help you catch every major move, then you should base your Trading on the above method.