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#1 05-02-2021 17:40:29

Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 3054

A trading strategy that follows the evolution of trends

A trading strategy that follows the evolution of trends

One of the most effective trading strategies is to take advantage of prevailing trends in price movements - but how do you identify trends and why are they important?

Keep it simple

There are so many forces that combine and intersect to affect the price of a currency pair that it is impossible to pick one, separate it from the rest of the herd, and analyse it reliably. There are simply too many factors working together. Global news, the policies of national governments, central banks, large private market players and a multitude of other elements and ingredients all interact and are filtered through the minds of millions of traders and their perception of what is happening in the world. It's best, overall, to think of the market as a giant mixer that takes all of this information - all known knowledge, known unknowns, and unknown unknowns - and whirls it around together. The resulting mix is ​​the price of a currency or a security.

In a way, what you know doesn't really matter. The market just doesn't care. Even if you feel like you have valuable information about upcoming events or the like, the market doesn't care. There are too many factors involved, like what the big players know and what they think the little ones know. If you think about it too long, the workings of the markets become so complex that it becomes more and more difficult to navigate.

So what to do in such a situation? How are you supposed to use the information you have to forecast future price developments? Even in the immediate future? This is a question as old as the world and it is the gist of what every trader tries to do in one way or another.

One of the answers is to simplify things. Yes, the market is driven by this myriad of interlocking and interacting forces that would require all the supercomputers in the world, interconnected and working together to function ... And even then, they couldn't. But in the end, the price of a currency is always, ultimately, only the expression of the balance between buyers and sellers. Some traders will say that at the end of the day, a trader's job is not to figure out what affects the market. In short, the argument is that you don't even need to worry about the underlying fundamentals because you'll never be smarter than the market.

If you've simplified to the point of not knowing, not being able to know, or even not caring about what makes the market move, all that's left for you to do is play the market that's right there in front of you. You shouldn't be hoping or wishing for what it might be, you shouldn't try to outsmart the market, but just take what is actually there and use it to your advantage.

Follow the movement

Anyone who trades - whether they are professional traders or just striving to supplement their income - wants nothing more than to be a regular trader. Consistency is probably one of the most important goals you should have when it comes to the way you execute your trades. And there is only one way to start moving towards that goal. To get consistent results, you need to be consistent in the way you behave.

Trend trading is arguably the best, most efficient and profitable way to achieve the levels of consistency you should aspire to. And if that sounds like a bold statement to you, know that there are genuine scientists, scholars and statisticians in very prestigious educational institutions who have invested time, money and intelligence to evaluate these things. There are genuine peer reviewed studies that support the claim that trading by following trends is the most effective way.

Being on the safe side of an already established trend is a simple and effective way to give your trading system an edge that it might not have otherwise. And the simplicity is the best part of this approach. In a sense, there isn't much to do. Almost anyone can look at a chart where there is a trend in the evolution of prices and say, "yes, it's definitely up" or "oh yes, it's down". While it would be great if it were really that simple, it does help to narrow it down to this level of analysis, because ultimately identifying a trend is the essential part of this approach to trading.

"Anything worth having is worth going for - all the way." - J.R. Ewing



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