Trading forex in trending markets is considered to be one of the most ideal set of money making conditions. This is due to the more predictable, directional movement and in forex trading, we all know that price movements mean profit making potential!
Trending markets don’t occur all of the time however, so if you’ve integrated trend following techniques into your forex trading strategy, then you have to make hay while the sun shines. You need to be able to identify a trending market and be able to take advantage of them immediately.
What is a Trending Market?
So what is a trending market and how can I determine if a market is trending? This is actually one of the most common questions that new traders ask, and in all honesty it’s one of the most simple to answer.
Simply look at your forex trading chart and see if price is moving in a diagonal direction? If it is, then the market that you’re looking at is a trending market!
“A bullish trending forex market will leave a price action footprint of higher highs and higher lows.”
“A bearish trending forex market will leave a price action footprint of lower highs and lower lows.”
Yes, it really is that simple!
You can choose to make trading forex as simple or as complex as you like and finding trends shouldn’t be made any more complicated than this.
Trending Market Forex Trading Tips
You should keep in mind that the stronger trends are established on the higher time frame charts. Using the intraday charts to find trends is dangerous as what you see here, might not align with the bigger picture and you’ll actually be trading against the big money.
One of the golden rules of trading forex in a trending market is to buy low and sell high. Trading can be such a simple game if you allow it to be!
Here are a couple of tips which we think deserve to be written down and pinned just above your trading screen so they’re never overlooked.
Don’t buy high in a bullish trending forex market.
Don’t sell low in a bearish trending forex market.
When you see the trending, price action footprint broken and the market that you’re trading ceases to make a new higher high/lower high (in a bullish trend as we’ve described above, of course), then the trend momentum has probably died out and you can probably expect some consolidation type price action to follow.
“Buy the dips, and sell the rallies“.
This is a good way to remember how to position yourself into a trend correctly and avoid the chance of being taken out by corrections.
Remember, the trend really is your friend!
Source: Vantage FX Blog