2Bull Forex Blog

If you look at any chart of currencies you will see that they move in trends. These are of course easy to spot in hindsight.

Timing your entry levels and following these trends is of course harder and the aim of all currency traders, however 95% fail and lose their money.

If you are using or want to use technical analysis you must know the basics of trend following and here are some tips to help you make profits.

Let’s look at 3 types of trend and then look at some tips for trading them:

1. Long term Trends

As currencies reflect the underlying health of the economy and the economic cycle there are currency trends that last months or even years and this is the primary trend.

2. Intermediate Trends

These last from anywhere between a few weeks and months and are reactions within the larger primary trend.

3. Short term Trends

These last for a few days to around a couple of weeks.

All the above can be traded for profit and the trends you want to trend are down to personal trading style and taste.

Trends not to trade

Many of you will have wondered why we ignored daily and intra day trends.

The answer is they simply cannot be traded.

While you can see them in hindsight, the data in a day is unreliable, as all daily and intra day volatility is random.

If the data cannot be used to get the odds in your favor you will lose when trend following, with any form of technical analysis.

Trend following in very short periods is a mugs game and that’s why you never see a day trader with a track record of profits.

So how do you catch the trends and enter with the best risk reward?

Well this is the challenge for all FOREX traders and as we have said it is more difficult than most people think – that’s why 95% of traders lose.

Here we will give you some tips when currency trading for catching currency trends and turning them into profits:

1. Understand the concept of support and resistance and trade breakouts.

It’s a fact that most major market moves start from new market highs NOT market lows, so if you use breakouts you will catch the really big moves.

2. When Buying Support or Selling resistance DON’T Predict

This is a major error made by novice traders. Then buy into support and “hope” it will hold.

When you are trend following this is a good way to lose. You are predicting where as you should be acting on confirmation.

Always wait for a test of support and use a momentum indicator to indicate a change in direction in your favor BEFORE entering the trade.

This will confirm support or resistance has held and the momentum has reversed you then have the odds in your favor

3. The differences between Long and short term trend Following

The concepts are generally the same, but there is one difference in my view between following long and intermediate trends and short term ones.

With long term and intermediate trends you can trail stops in short term trading you must use a target.

Because the profits are smaller and moves shorter in the latter, they can disappear quickly, so you should “hit and run” and bank profits on the hitting of your set target.

When doing the above we always set the target lower than the consensus.

If prices are generally targeting a level and the market is looking for it we would bank early.

4. Patience

Trend following involves being patient and staying on the sidelines until you see an opportunity that fits your methodology.

Don’t be in a hurry to trade – Only trade when the odds are in your favour.

Catching trends and making profits from them is hard, but with the right approach and only trading when the odds are in your favour you can pile up some big gains.

Each year there are a few trends that offer truly outstanding profits. They emerge quickly, move fast and pile up huge gains.

Most traders however fail to catch them because they don’t keep in mind this simple fact:
The Biggest moves start from new market highs NOT market lows.

This fact is significant as most traders particularly novice traders, like to:
“Buy low and sell high”

While this wisdom is commonly accepted, you will NEVER catch the really big trends if you follow it.

Why?

If a market starts to trend from a new market high (and almost all the biggest trends do) you will wait for a pullback that never comes and never get on board with the best risk to reward.

In currency trading a better way to trade is:

“To buy high and sell higher”

While you will miss a bit of the move that’s ok - the odds are on your side of the trend continuing.

If a market breaks up from a new market high, you have a trend in motion on your side and remember:

“A trend in motion is more likely to continue than reverse”

Catching the big moves.

If you constantly look for trades to breakout above resistance and make new highs then you can trade with low risk and high reward

You will also have the comfort of knowing most traders can’t do this; as they are stuck in the mindset of:

“Buying low and selling high”

Most traders lose in currency trading because of this inability to buy breakouts.

Breakouts also provide another advantage for traders low risk.

Why?

Because stop levels are obvious and tight, keeping risk small.

You can increase your odds of success further by:

1. Only buying breakouts of valid well established resistance that has been tested several times.
2. Using momentum indicators such as stochastics and RSI, to check price momentum is accelerating as the breakout occurs.

A breakout accompanied by an acceleration of price momentum increases the odds of the trade being successful.

Most FOREX traders see a big move develop and wait for a pullback that never comes. They then watch in frustration as the trade turns into one of the major moves of the year.

If you buy the breakout, you won’t miss these big moves and profits.

It may feel uncomfortable to do at times, but that’s why it’s so profitable – Most traders simply don’t have the mindset to do it.

So to make money in FOREX trading keep in mind:

Buy high and sell higher is the way to make money Not Buy low sell high!

Buy breakouts and you will increase your profitability, get low risk and catch the mega trends.

Anyone who decides to get into stock trading will soon find out this can be a world of ups and downs. Still, many investors find trading stocks is one of the best ways to accumulate and build on wealth. Even if it’s only a few dollars at hand to invest, stocks online can be a great consideration. Buying and selling online delivers not only a lot of perks in regard to ease, but also variety.

Stocks online now available for purchase come in all types. They can range from a few pennies to those that cost hundreds per share. For the most part, investors will find that stocks online are those that can also be purchased through a broker, paying higher fees. The advantages to online trading include not only lower fees, but also control and access to more markets in many cases.

The types of stocks online for purchase tend to include:

Penny stocks: These stocks are considered “junk” by some, but the fact is some people have managed to make very big returns on cheaper buys. Start up companies and those new to the stock market often offer their stocks at very affordable prices. While they might not actually cost a penny, these lower priced stocks are worth researching for investors without a lot of means. These are common buys online.

Blue chips: Some of America’s biggest company names fall into the blue chip category. These stocks online tend to be more expensive than others, but they are typically noted for their ability to maintain or increase price. The theory behind the blue chip stocks is that if they fall, they will generally recover their value and even increase it.

Bonds, futures: It is sometimes possible to buy into bonds and futures online, as well. These are also available for public trade and inasmuch can be great investments. Bonds can include municipal offerings and even those issued by companies. Futures tend to revolve around crops, such as oranges, wheat, livestock and so on.

In reality, those who look for stocks online will find almost everything available on the domestic front can be hand online, as well. The availability of some markets will depend on the site being used. Some traders will only offer specific markets they have access to.

Another option for online traders falls into the realm of foreign markets. Forex trading has become a very big deal with the Internet making it easier and easier for people to invest in foreign stock markets. Getting into foreign markets successfully will likely require some very serious homework on potential buys and pitfalls. The offerings on the foreign market will depend on the sites being used to invest.

No matter how stocks online are bought and sold, it’s a good idea to enter the deals with care. Do some homework on the sites being used to buy and sell, study the potential stock buys and do pay attention to major trends up or down. Even investors with a very little bit of money can make some real returns when they play the game well.