The old adage the trend is your friend is true. Trend trading usually finds big moves and when wrong losses are small. Most currencies tend to trend and the trending periods can last days, weeks and months giving you many opportunities to trade those trends.
So what is the trend and how can you define it? Seeing a trend on longer time frame charts (daily or hourly) is easy. If it slopes up then its an uptrend and if sloping down then its a downtrend. One must also consider whether the trend is likely to continue or now, this is key.
So how do you anticipate FUTURE trend direction?
I measure trend in 2 different ways.
Market Breadth - This is the percentage of currencies the currency being analyzed is trending up/down against. For example if the EUR is going up against all other pairs it has a 100% strength. If the USD is the weakest then looking to buy the strong EUR vs weak USD is a high probability situation.
Now this only measures the breadth of all pairs. To finish our statistical analysis we must find out if these trends are minuscule or exploding or somewhere in between. We suggest using FX Multimap or other trend intensity tools to do this. The FX Multimap is an indicator that goes back 20 days and measures average volatility. Then you compare today's volatility compared to the past to get a perfect idea of how statistical strong or weak each pair is.
I use a tool called the Total Strength which combines, averages the trend breadth together with the FX Multimap intensity. It's easy to use one indicator than 2. I analyze all the pairs and then look at the statistically strongest currencies and buy them vs the weakest. I then look for sells in the weakest currencies vs the strongest.
No system is 100% winning. You will have losses trading with the trend but they will be fewer than counter trend trades which are more difficult to TIME. Trend trades also find some HUGE wins and just one HUGE WIN will eat up 5 to 8+ losses making trend trading the easiest method for new traders.
So where do we get in and out?
Finding the strongest trends is the first and most important part. We then use trendlines for EXACT entry! If we are looking to buy we draw trendlines over the highs and buy when price breaks the trendline. Reverse method for sells.
We also like to buy sideways 1 hour+ consolidation trend breakouts in the direction of the trend. Stops go right under the swing, so if buying under swing low and if selling above swing high.
Trail your stop using trendlines or chandelier trailing stop. We also use Fibonacci profit targets to find ideal exits.
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