If you’re just beginning to explore the world of forex trading, you’ve probably been hearing a lot about trends. Some people like to trade along with them, some like to do the opposite, and others have still more unusual strategies. As a newcomer, trading with the trend is the wisest thing for you to do, and this article explains the reasons for that.
Why trade with the trend?
As a new trader, the most important thing for you to do is find your feet and get the hang of how everything works. As in any other field of human endeavor, you need to know the rules before you can start creatively breaking them. Trading with the trend won’t necessarily bring in big bucks, but it is comparatively safe (as long as you are sensible about things like leverage), and you can do very nicely that way if you’re patient.
Types of trend
Trading with the trend doesn’t mean that you lack flexibility. You can still adjust what you do to suit your specific circumstances. Primary trends are a good choice if you want to build up money reliably over time and often indicate the best shares for beginners. Secondary trends can create interesting opportunities, and minor trends, when they happen, can help you to make money really quickly if you’re quick to take advantage of them (though they also carry more risk).
No matter what trading techniques you eventually end up using, you will need to learn how to track trends, and this is something that you should be focusing on early on. Use trend lines to help you get a more realistic picture of a trend over time. Make sure you’re always paying attention to the period you are looking at – everything looks more dramatic (and often misleadingly so) if that time period is short. Get to know the specific tools your broker provides and how they work.
Things to remember
If you want to be successful in any art or craft – and forex trading is no different – then you need to begin by understanding yourself. This begins with recognising that your brain is hardwired to spot patterns even when they are not there. Don’t let it lead you astray. Secondly, remember that all the patterns you see in data can do is tell you about the past. There can be no certainty about what the future will hold. There is no magic involved in forex, and there are no shortcuts.
Trading with the trend will help you get to grips with the basic principles underlying forex and other types of trading before you go taking additional risks. It allows you to take advantage of the experience of other, more established traders rather than having to work everything out on your own. Over time you will develop an instinct for how certain currency pairs behave under specific conditions. It is that instinct, combined with reason and wariness, that makes successful trading possible.