How to catch a trend in Forex or the stock exchange
We are already accustomed to constantly hearing the phrase “Open trades according to the existing trend”; this is the main recommendation that can be heard from professional investors.
Well, it’s clear that only the riskiest traders open a buy position when the price falls or sell when the exchange rate rises.
That is, we can say that most traders prefer to buy when prices rise and sell if there is a downward trend in the market.
But the main problem is how long the existing trend will last; the financial result of the transaction directly depends on this.
This is quite simple to do, just look at the chart of a currency pair or other asset and find the turning point from which the existing movement began:
The chart above clearly shows the beginning of an upward trend in the eur/usd currency pair and a reversal towards lower prices; now there is a downward trend for this asset, which began on May 26, 2021. That is, the existing downward trend has been present on the market for about a month.
For the eur/usd pair this is not that long, so you shouldn’t expect a reversal soon, although it is not excluded, but the likelihood of a trend change is still low.
When is the best time to enter the market following a trend?
If we consider the situation described above, it would be logical to open a sell transaction, but it is advisable to open it only when news appears that will contribute to a further fall in the price of the euro. A new impulse to sell the eur/usd pair will strengthen the trend and reduce the likelihood of a reversal:
When opening trades during an already existing trend, do not forget the rule - “The longer a trend exists, the higher the probability of its reversal.”
Entrance at the U-turn
Many consider this option to be the best, since it is with a price reversal that a new trend begins, which means you can earn the maximum here.
To implement this option, you need to find an asset for which strong news appeared that caused a reversal and open a trade in the direction of the new trend.
Here you can also use a strategy based on pending orders , when, depending on the direction of the trend, pending orders are placed behind support or resistance levels, triggered when these levels are broken, which indicates the beginning of a new trend.
In this case, you simply focus not on the news itself, but on the price reaction to its release and the display of this situation on the chart in the trading platform.
Trend trading is not a complicated strategy ; to implement it, you just need to follow a few simple rules.