The financial market is always trending in nature. Most of the time all the major currency pair moves in favor of the long term existing trend. For this very reason, the professional traders always suggest the novice traders execute their trade in favor of the market trend to reduce the associated risk in trading. But sadly most of the new retail traders fail to identify the trend of the market correctly. In fact, the majority of the traders are trading against the long term prevailing trend. In this article, we will give you a clear explanation how to trade along with the trend and identify the trends in the trend to make a short-term profit.
There is no absolute rule to identify the existing trend of any financial asset. However, we can assume that the currency pair is in an uptrend if the price of the asset stays above the 100 days SMA in the weekly or daily chart. Similarly, if the price levels stay below the SMA then it is usually considered as down trend. Though this sounds so simple some professional Aussie traders often consider this method as the best way to find the prevailing trend of the market.
The currency market is always trending in nature but this doesn’t mean that the price will always go up or down. Along with its path, it will face some minor retracement. This minor retracement is often known as a trend within in the trend. For instance, if you see that the EURUSD pair is in an uptrend in the weekly chart then you might see a different scenario in the 4-hour time frame. Though the pair is trending up yet the 4-hour time frame might exhibit bearish trend characteristics. So we will learn how to ride the minor trend without risking too much of our account capital.
Before you trade the minor trend in CFD trading industry, it’s important for you to find the minor support levels. The best way to trade the minor trends is to use the price action confirmation signal at the minor levels of this m market. But you must be extremely careful while using this system since you are trading against the longer time frame trend. Most of the time, the professional traders hold on to their open position only 2- 3 hours. Some traders often use the trailing stops to maximize their potential profit in the financial industry.
History always repeats itself. Similarly, in the Forex market, you will often see repeated patterns which will allow you to execute high-quality trades. This type of trading is often known as chart pattern trading. But chart pattern trading is a little bit difficult as it requires perfect knowledge of multiple time frame analysis. Some of you might say chart pattern trading requires a huge amount of time and solid trading experience but you must remember that without showing strong patience you are nothing in this market. The successful traders at Saxo often wait for a week only for a single quality trade setup. But even after waiting for such long period of time there is assurance that you will have a winning trade. So always trade with low risk to save your investment.
As a currency trader, you should read a lot. Learning is a continuous process and without developing solid trading skills you will jeopardize your trading account. Being new to this market you might face extreme difficulty with currency pair trading but if you stick to your learning process then it’s just a matter of time to understand the real dynamics of this market. Making money in the online market is just like doing a business. You need to consider trading as your business and trade the market with discipline. Losing or winning doesn’t really matter as long as you stay disciplined.