How to catch a trend in Forex or the stock market
We've become accustomed to constantly hearing the phrase "Open trades according to the existing trend"; this is the main recommendation you can hear from professional investors.
Well, it is clear that only the most risky traders open a buy position when the price falls or sell when the rate rises.
This means that most traders prefer to buy when prices rise and sell when the market is in a downward trend.
But the main problem is how long the current trend will last, as the financial outcome of the transaction directly depends on this.
It's quite simple to do this; just look at the chart of a currency pair or other asset and find the reversal point from which the current movement began:
The chart above clearly shows the beginning of an upward trend in the EUR/USD currency pair and a reversal to a downward price trend. This asset is currently in a downward trend, which began on May 26, 2021. This means the current downward trend has been present in the market for about a month.
For the EUR/USD pair, this is not that long, so we shouldn’t expect a reversal anytime soon. While it is possible, the likelihood of a trend change is still low.
When is the best time to enter the market following the trend?
Considering the situation described above, it would be logical to open a sell trade, but it's advisable to do so only when news emerges that will further push the euro down. 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 existing trend, remember the rule: “The longer the trend exists, the higher the probability of its reversal.”.
Entrance at the turn
Many consider this option to be the best, since a price reversal is when a new trend begins, meaning you can earn the most money here.
To implement this option, you need to find an asset for which strong news has appeared, causing 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, which are triggered when these levels are broken, indicating 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.
