Feb 13, 2019

Forex Trend Following Strategy


Trend trading is a strategy that is very common in market technology trading. Trends can be up or down. Strictly speaking, trends in courses are always present. Even a sideways phase represents a trend, it is only called not as a trend but as a consolidation. How to do this will be presented in another article. This is about the classic trend.

Trading up or down trends?
Trends all show similarities; they only differ in their volatility from asset class to asset class. Since foreign exchange is the largest and most liquid capital market and global trade takes place 24/5, even currency pairs are volatile, i.e. fluctuation-wide. Nevertheless, they often show stable trends.

Whether you trade up or down depends on your own preferences. Although downward trends are usually more dynamic in stock markets, both currencies' upward and downward movements can be very dynamic. While stock sales are one-way, currency pairs depend on which currency is sold. If the US dollar is sold against the euro for relevant reasons, it can mean a dynamic increase and thus a trend in the EUR/USD currency pair.

How do you identify a trend?
Forex trends are usually influenced by many factors. Each currency has its own weighting in the factors. Some are extremely dependent on commodity prices, others on the economy in China and others on political and monetary policy decisions. It is advisable to know these characteristics, even if you strictly act according to the market technique.

How do you act trends?
Meanwhile, you can trade trends in several ways. It must first be defined how long you want to participate in the trend. You can either try to trade the whole trend, so get in as early as possible and get out as late as possible. This will not always work, as you can often not identify a trend reversal with certainty.

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