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Forex Trend Following

So you want to make the same sort of money as what the big banks do? Perhaps you need to look at Trend Following the forex market.  Trend Following is usually associated with long term trades ranging from a few days or weeks to a few months or perhaps years.Typically Trend Following traders trade of a daily, weekly or even a monthly chart. Trend Following traders are looking for the big long term trends and hence look for big numbers of pips. 

As with other forms of trading such as swing trading, Trend Followers are looking for historical areas of support and resistance, that is price levels that on the weekly and daily charts where the market has consolidated and tested price levels numerous times,( 2-3 times at least). If these areas of support and resistance appear on both the weekly and daily charts then they are of significance to the market. 

Trend Following involves waiting for these lines of support and resistance, or "channels" to be broken  before entering the market.That is trend followers always wait for the trend to shift first. The primary consideration of trend following is that price is the number one factor, other factors are always secondary. Whilst technical indicators may be used for  confirmation of the break in a trend or a reduction in price momentum the overriding consideration is always price.

The next important factor with Trend Following is Money Management, or position sizing. This becomes especially critical when trading long term as the market can move against you for long periods of time so your position sizing needs to reflect these large stop loss and take profit values. During extended periods of high volatility position size also needs to be reduced to counter the extra risk associated with the volatility. 

 

 


 
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