V. 22:9 (14-20): Make The Trend Your Friend In Forex by Kenneth Agostino and Brian Dolan

V. 22:9 (14-20): Make The Trend Your Friend In Forex by Kenneth Agostino and Brian Dolan

So you didn’t see that last headline-grabbing market move coming? Here are some techniques you can use to make sure you’ll be prepared next time.

Of the many market sayings that traders throw around, none may be more overused and less understood than the adage “The trend is your friend.” All too often, the phrase is used after a trader has taken a countertrend position and subsequently been stopped out at a loss. At this point, remorse sets in, and most traders kick themselves not only for having lost on a countertrend trade but also for not having caught the latest move in the trend itself.

To avoid this all-too-common scenario, let us suggest using several technical tools to identify whether a trend is in place, and then additional indicators to help maximize trading profits. Having a strategy in place to identify trends is essential to successful trading in any market, but especially so in the case of the foreign exchange (forex) markets. Currencies have a greater tendency to move in trends due to the longer-term macroeconomic elements that drive exchange rates, such as interest rate cycles or global trade imbalances. Currencies are also predisposed to short-term, intraday trends due to international capital flows reacting to day-to-day economic and political news.