Trend is like a prevailing trade wind blowing across the vast ocean. Trend is steady. As sailing a ship in the direction of the prevailing wind is easier than against, trading with the trend is also easier and often more profitable. Another way of looking at trend is like the current in a river. It’s easier to swim downstream with the current than upstream against it. Go with the flow.
DealBook® 360 screen capture printed by permission. © 2008 by Global Forex Trading, Ada MI USA
Start your market analysis with speed. How is the market moving today? Is it range bound or is it trending? Here is an important trade hint: A market will maintain its speed until something fundamentally changes market bias. So if it is trending, it will likely stay trending.
To measure trend, use a long-term moving average. For instance, you can use moving averages such as:
Whatever seems to work for you is fine. The chart layout at FX Bootcamp uses the 200 EMA. Based on the angle of the 200 EMA you will be able to define the strength of the trend:
• A steep angle will indicate a powerful trend.
• A shallow angle will indicate a weak trend.
The use of a long-term moving average, such as the 200 EMA, is a function of technical ...