How many traders trade the long term trends? Not many, they trade the shirt term noise scalp and day trade for small profits where it’s pretty obvious from looking at any chart the big trends that last for weeks or months make the big profits…
Let’s look at how to catch the big trends and the big profits, make more money and spend less time on trading.
The big trends are always there and they represent the underlying health of the economy of the country the currency represents. Periods of economic expansion and contract last a long time and so to do the currency trends that reflect them.
If you are long term trend following you simply need to get in on the trend and hold it. So how do you do this?
Start with the big weekly chart to give you the long term view and then look to get in on a breakout to a new high or low. All big trends start from breakouts and if you trade them, you will have the odds on your side. Look for breakouts of strong levels, the market feels are important and if they break, new buyers will enter and stops will be hit and a new trend will develop.
You need to time your move on the daily chart and as soon as you are in the trade, your stop is placed behind the break.
If it’s a good breakout, the market will accelerate away from the breakout point leaving you with a profit.
What we have just looked at is the easy bit is getting in on the trend; the hard part is holding it.
If you want to hold long term trends, you have to accept open equity dips as the market retraces will eat into your open profit. If you trail a stop to close, you will get stopped out to soon – you have to accept short term dips in open profit to bank a big profit at the end of the trend.
So where do you trail your stop?
A good area is behind a key moving average such as the 40 day MA or a nearby support level around this area.
The above is a simple buy and hold strategy and you can hold trends for weeks or months do it. If you look at any chart you will see the logic of the above method of trading and how it can lead you to currency trading success.