There are number of basic skill a trader needs to have. Identifying the trend is one of the most important ones. The goal is to identify which direction price moves and make trades along that movement.
Sometimes identifying the trend may be a confusing task. But overall it is easy. Anyone can see in what direction price is moving. Therefore anyone can learn to identify the trend on any time frame. If you are new to this I recommend you to start with higher time frame charts since they have less noise.
There are many techniques and indicators to identify the trend. My favorite ones are the most simple ones. I like to apply a moving average indicator with the large number of averaging periods. Rising MA indicates the uptrend, falling MA indicates the downtrend.
However you can encounter a flat market from time to time. That is when price is bouncing up and down horizontally between two levels. In this case the upper level is resistance and the lower one is support.
On the other hand the longer you have sideways movement of price the more likely to have a breakout of the price out of that range. And that is a good news since it presents us a good trading opportunity.
Another good way to use the sideways market is to take scalping trades. Even though I’m not a big fan of scalping there are many traders who successfully make such trades. You take a short trade when price approaches the resistance level and exit at the support level. Then you make a long trade at the support level and exit when price approaches the resistance level.
No matter what strategy you will base your trading decisions you need to test your trading system on past data. The next step is to forward test it on a demo account or even on a small account with real money. That will give you clear understanding of the risks involved with trading certain strategy.
As I described you before identifying the trend is not a hard task. Anyone can learn it and make money trading currencies. On the other hand the hardest part is to be objective while identifying the trend or any other parameters of the price. It seem not that easy when it comes to real hard earned money.
Very often it’s not easy to take a trade when there is a clear trading set up has formed. For other traders it’s not easy to stay away from the market for longer periods of time and they jump into it even though the trading setup was not formed. Therefore if you want to become a successful Forex trader you need to develop self control and objectivity.
pertamax... nice post n keep posting
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