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Tuesday, November 26, 2013

The Forex Market Trading: How To Make Money From The Market Trend

The market can only do one of three things at any given time: It can go up, down, or sideways. The trick to trend trading in forex is to catch the market move and price action when the market is going up or down, but stay out of the market when it is going sideways. The objective of many technical indicators that are used on forex price charts is to tell when the market is going to move up or down and signal a high probability forex trading signal.
For many traders they will wait until the short-term market trend and the long-term market trend line up, making sure that they are always placing their trades in the same direction as the overall trend pattern. The only time there may be an exception to this rule is if the trader sees a clear market pullback and wants to try and trade the retracement of the market.
One of the most popular types of chart analysis called Elliott wave analysis show that markets move in distinct patterns that include drawbacks in the price even if movement in the overall trend remains strong. One of the main rules of trading based on Elliott waves is that there will be five distinct phases of market movement, and since most currency pairs tend to stick with this type of price action than a trader who can recognize this pattern can use it as a trading signal.
When you are drawing a trendline on a forex price chart, it is important that the line touches the price level at least three times in order to be considered a valid trend. This is a simple tool that is included in every charting application and it can be used by a forex trader in a number of ways. One important way to use trend lines is to set your stop loss and take profit levels around that trend line so that you are trading with an increased probability of hitting the take profit level and missing the stop level.
Another away that traders can use the trend line as part of their trading strategy is to place a trade when the price data has clearly broken away from the line indicating a reversal. Being able to identify the overall market trend is a crucial skill for being a successful forex trader, and using the trend line on the chart of the currency pair that you are trading will help you get a sense of how the market is behaving and which direction you should be trading in.

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