By Cy Vanover
There are many different strategies that can be used to trade in the Forex market. Some are quite complicated while others are fairly simple. Trend following has become a very popular trading strategy because it is very easy to learn and implement. Trend following, in its simplest form, involves identifying a trend just as it first breaks out and following it.
To identify a trend, you must first understand the concept of range bound. A currency is trading within a range when it is trading consistently between two price points that are not too far from each other. When you look at a chart of a currency that is range bound, it will look as though the currency movement is nearly flat.
One way you can identify a range bound currency is by examining its moving average angle. If the moving average is moving upward at a steep angle, it is showing a rising trend. If the moving average is moving downward at a steep angle, it is showing a declining trend.
An MACD histogram is another tool that can be used to identify a range bound currency. To use a histogram for this purpose, you put in additional levels above and below zero on your charting software. Once this is done you can very easily see whether a currency is range bound since there will be very little movement below or above the histogram line.
Once you have identified a currency that is breaking out of a range bound position, no matter which direction it is going, you can then make a decision whether to enter a trade position. Always watch your positions very closely in case you need to close a position that is moving against you.
Trend following is only one of many great Forex strategies. Because of its simplicity, it is a good strategy for those who are new to the Forex market. |
No comments:
Post a Comment