An extremely basic article today but not useless, which takes up the fundamental advice of forex trading: follow the trend. It sounds simple but it is not always as easy as it seems. This remedial course will allow you to learn how to identify a trend, whether or not to enter the market and if so which way to place your order. You will also learn to draw your own trend lines and use certain indicators to identify the market trend (or the absence of a trend for that matter).
Of course, some are adept at contrarian approaches, and these methods can work just as well if used when appropriate. Only here, trend following alone will be discussed since it is the most widespread method among forex traders in Australia, and it is also the easiest to understand when starting out. Opting for Xtrade Australia is the best choice in this matter.
Trend tracking in the forex market
The objective of trend following or directional trading is to follow an upward or downward movement of the market. We will try to follow the entire movement, even if it is quite utopian to want to buy at the lowest to resell at the highest. The idea is still to get closer to this ideal. It is a method that is well suited to the forex market since it minimizes risk taking and the costs (spreads) taken by brokers. Indeed, the number of trades is relatively low with the trend following. Finally after, everything depends on your time horizon but with a graph in m5 you can hardly speak of “trend”. Personally for this method, we favour the times from H1 to H4, over 150/200 periods.
Why follow the trend?
Like any theory, trend following is based on an initial premise: the markets are punctuated by large bullish and bearish cycles which follow one another. If you think this is wrong, you have no interest in following this method. And there are many times when this claim can be questioned. Nevertheless, the trend following method is still reputed to be one of the most effective in the long term.