If we divide the word Trade Following we easily understand what Trend Following is. Trends mean when price moves up and down and moves in a unique direction over a while. On the other hand, following means to follow.
In this way trend Following means simply to follow the movement of the price curve. There is no fixed Trend following technique rather there are some states of guidelines that help to understand the Trend.
If two traders follow the same Trend Following strategy in the same market still might have distinct entries and exits but both of them can bring profit in both Bull markets and Bear markets.
Principals that you need to follow
There are a few principles we need to follow while trading the trend such as you can buy high and sell low. Just follow the price to understand the trends. You can risk a fraction of your equity.
You should not have any obdurate profit targets. It is better to trade in all markets. If you are not a professional trend follower still you might use this principle and find a positive result in your trading.
If the price looks overbought it is better to stay out because it could reverse at any point. The Above picture first shows the overbought price but over time, the price becomes more overbought by another 1200 Pips.
In this picture, the price looks oversold so it is best to stay out as it could reverse anytime. From this, we can understand that which is high can go higher, and on the other hand, which is low can go further lower. Trend followers can make a profit between these high and low situations.
How do you like to Trade with Trends: As an Investor or Trader? What would you call yourself, Investor or trader?
Most of the time people want to be investors, not traders but if you look at the market most of the people who made a fortune from this business are traders, not investors.
Most of the investors put their money in the business assuming that over time it will grow. As the value of the investment increases the person increases his investment but if the market goes up it yields profits but when it goes down the investor incurs a loss.
If they are in the bull market they make a profit but if they are in the bearish market they lose the money. Without knowledge of analysis, investor fears the bear market because they do not know how to survive in the bear market. Traders have definite plans for winning money.
They do not care about the investment they just follow the trends and try to optimize their money. Trend Followers Simply Follow the Price Trend When we try to forecast the market after a certain time, it starts to dominate our judgments.
As a result, this leads to serious trading flaws. Like we try to take a loss because we want to be precisely right.
We try to average our losses because we have a tendency to minimize our losses, when we incur a loss we have a tendency to take revenge on the market because we want to make good on our loss but rather do all these things the best way is to follow the price.
If we look at the above picture we can see resistance is continuously breaking with a series of higher laws so, in the long run, it shows an uptrend.
The above picture is just the opposite of the uptrend. If we look at the above picture support is contentiously broken with a series of lower highs and it shows a downtrend in the long run.
How do we know it is time to take away while we are following the trends? When you find that the price is maintaining a higher low, where the resistance level is gradually breaking, it suggests an uptrend. In this situation, you should look for a long.
When you see that the price is maintaining a lower-low where the support is gradually breaking then it provides the indication of a downtrend. In this situation, you should look for short.
Do not try to probe how low or how high the market can go because it doesn’t even matter what you or I think.
It follows its own trends. This also means trader’s psychology affects the movement of the market. So in one sentence Trend following means make research on uptrends and downtrends and trying to understand the patterns of price.
Do not try to predict how high or low the market can go, if the price is high look for long if the price is low go for short. Whenever you feel the market will reverse just take a note on paper. After 30-40 attempts try to see how accurate your guess was and you would surprise at the result.
The opportunity for trend followers?
The professional trend follower can trade in all the markets. There are usually other sectors where trend followers can trade while they are working in the forex market.
The professional trend follower can trade in all the markets. There are usually other sectors where trend followers can trade while they are working in the forex market.
Conclusion
If you wait for those levels to take the shot you would have already missed the moves.
People talk about support and resistance but they don’t look at the psychology behind it. People do not try to understand how these types of trade work.
So If you kind of understand how it works and if you have a sense of it, you will have confidence and your trade will improve.
