Little Known Secrets Of Trading Trends!

First you need to know how to determine whether the market is in a trend or not. If the market is not trending than naturally it is ranging or moving sideways. Learn how to draw trendlines. This includes the inner as well as the outer trendlines. Always remember the say,"Tell me where the market has been and I will tell you where it is going to go."

You also use the ADX indicator combined with the DMI indicator to determine whether the market is in a strong uptrend. Now find the latest upward rally AB in the market. Most trading software now has the Fibonacci Retracement and Extension Tool. If you are a currency trader and use MT 4 then you can easily find this essential tool in the menu.

Now, suppose you have drawn the Fibonacci Retracement and Extension Levels on the chart. Look for a candlestick pattern like the Bullish Engulfing Candlestick Pattern, Hammer or a Morning Star in the price action to form. Once this candlestick pattern appears, it heralds the reversal in price action that is about to take place. These candlestick patterns are formed at the bottom of the swing so when it form, plan to enter the trade with a stop loss slightly below the entry. This stop loss should not be very tight otherwize it will trip with small noise.

Now, you have entered the trend. Good! Find the projected Fibonacci Extension Level as well as four levels of past resistance.This will help you predict the length of the swing. Determine you take profit target. Calculate the reward to risk ratio. It should not be less than 2 to 1. If less than 2, don't enter the trade. Using a trailing stop in an uptrend is not a bad idea. The only problem is that if the price action retraces momentarily and then again joins the uptrend, it will trip cutting short your profit target. Whatever, you are all set to trade the trend now. In case of a downtrend, jut do the opposite of what you do in an uptrend! Good Luck!

About the Author:
Mr. Ahmad Hassam has done Masters from Harvard. Get these Forex Scalping Cheatsheets FREE. Read the story of Richard Samuels, a post office mailman with a head injury and how he made a fortune with these Forex Signals.

Article Originally Published On: http://www.articlesnatch.com

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