*Learn the importance of identifying trends and trading with them!*
I thought I would bring you a quick read post today to not take up too much of your time. Although this may seem obvious to many of you, I feel that trading a current timeframe trend can be easily forgotten and many new traders start trying to over complicate entries. I have previously touched on the theory of trading trendline bounces which is similar to what I will show you in this blog post because simple trendlines form part of the multi layers of analysis I use.
If you haven’t already read that blog post then I recommend you do so because it explains how to find the current prevailing trends on various timeframes. You can find it via the link below:
Ever since I first started out trading I have always heard people say “the trend is your friend” and for a while I didn’t think too much about it. I thought people were being sarcastic and that the phrase was too basic to be of any importance to trading profitably but now I am a few years in to my trading journey I now realise how important it is.
Trading with the trend means trading with momentum and buying the lows or selling the highs. What this does is gives you an even greater probability of entering a winning trades because you are going with the flow and not trying to fight it. Think about it… it is much easier to run downhill instead of up hill.In theory, trading with the trend sounds very simple but I guarantee that a lot of new traders forget this as soon as they start trading with real funds. One of the simplest trading strategies I use is to buy the lows of 4hr trends and use the trendline tool, Fibonacci Retracement and 50ema to do this.
I am using the EURAUD FX currency pair as an example (shown below). My first entry was on the 1.57 support level where multiple rejections appeared and price was decelerating inside a nice wedge pattern. You can read the analysis of my original long position entry in a previous blog post by clicking on the link below.
Once the bearish trendline was broken to the upside and price crossed through the 4hr 50ema I was looking for entries for extra long positions. The next trend following entry was on the next higher low (buying the lows) when price came back down to the 0.5 Fibonacci Retracement level and the 4hr 50ema. Price then went on to make a new higher high and this again confirms the trend is bullish.
A 3rd simple trend following entry was just as simple. Once price came back down I used the trendline tool to predict where price might bounce and make a new higher low. The 4hr 50ema again acted as a dynamic support and a long entry would have been good again.
The trendline break & trend reversal is marked by the first black arrow. The other 2 long position entries are marked with the remaining black arrows.
So there we have it, the simplest trades are often the best trades. Find the trend for the timeframe you want to trade and then go with the flow.