The trend is your friend, a well-known proverb in the Forex market. The professional traders always suggest the new traders to trade with the market trend. If you place a trade with the trend, you can reduce your risk exposure significantly. The novice traders don’t want to follow this simple rule and as a result of this, most of them blow their trading account. You might be thinking how to trade with the market trend with a high level of accuracy. There are some certain steps that you need to follow to become a professional trend trader. Things might seem a little bit challenging to you but if you truly consider trading as your full-time profession, you must follow these steps to protect your investment.
Identify the market trend
Trend identification is the first thing that you need to learn to become a professional trend trader. The novice traders often use indicators and EAs to spot the long-term market trend but this will never give them any clear data. Most of the time you will be misguided this industry. You have to use the manual trading system to spot the nature of the market trend. In an uptrend, the market will always make series of higher highs associated with lower lows. So if you spot such criteria any currency pair, you can easily assume it as an uptrend. In case of the downtrend, the market will make series of lower highs associated with lower lows.
Use of trend line
By now you know the perfect way to spot a trend in the market. But how do you find the key support and resistance level? This where you need to use the trend line tools. In order to find the support level, you have to join minimum three higher lows in the market and you will get your key support level. For the downtrend connect three lower highs in the market to get your bearish trend line. The trend line will give you solid support and resistance level in any currency pair.
How to trade the trend line
Trading the trend line is very easy but the novice traders always make things complex. Even if you set buy limit at the trend line support zone, chances are very high you will make a good profit from that trade. But things become very complex for the novice traders when the market changes its trend. No trend is perfect and it’s not absolute. At times the market will change its trend to maintain the global economic balance. So how do you protect yourself from such situations? This where the stop loss features will come into action.
But when it comes to the high level of accuracy, you have to learn price action trading strategy. Instead of placing pending orders at the key support and resistance level, you have to use the price action confirmation signal. Price action trading strategy is one of the best ways to find the exact entry and exit point of the market. Let’s make it clearer. Let’s say you are trying to trade a bullish trend line. So, you need to wait for bullish price action confirmation signal at the trend line support level. Though this system is very profitable yet you should set precise stop loss to save your investment.
How to protect yourself from the trend reversal?
This is a very important part of the trend traders. We all know that nothing is absolute in the Forex market. At times the long-term market trend will change and you will have to embrace losing trades. This is where most novice traders make mistake. They never want to embrace losing trades once the trend line is broken. You have cut your losing trades as early as possible when you spot a clear break of the trend line. Learn fundamental analysis since it will help you to understand the strength of the market trend.