Foretring - Basic Currency Trading With Momentum of The Trend - If you've been trading Forex long then you've got read or heard someone claim that the "Trend is your friend". I believe this is the trading currency basic for many reasons.
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First, each time a currency is trending the momentum is within the direction of the trend. If you happen to be driving your car or truck downhill, if you take your foot from the gas, the momentum with the car continues to be downhill.
Second, I have learned through using RSI reversals as defined by Andrew Cardwell, that they are best and profitable if they're traded while using trend. There are two of the signals; positive or bullish reversals and negative or bearish reversals.
There is far more on reversals on this web site plus my eBooks. These reversals are the entry way for all those trades.
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But before we could enter using a reversal signal (which appears on RSI either automatically if you work with The RSI Paint Indicator, or manually, if you are drawing them yourself) we have to determine the direction with the trend. This may sound simple and at some level it's.
There are several techniques you can determine trend. Some traders work with a moving average. Others may utilize a trendline. I prefer employing a channel. The reason is that the channel although subjective has boundaries on two sides which a moving average or trendline won't have.
The first channel line is utilized by at the very least two aspects on either the superior or perhaps the bottom of prices with regards to the direction of the trend, as well as the second channel line is a parallel line that's placed at the highest or lowest touch point.
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Suppose costs are trending down. Place the first line along the very best points of prices.
I often use the line chart rather than bar or candle charts when I do this. Once I have this upper channel line I drag an extra parallel line on the bottom of prices with the lowest point. This defines my channel.
Once we all know the direction from the trend and still have defined its current boundaries we begin to consider reversals, in cases like this negative reversals as statistics demonstrate that the top signals to trade in downtrends are negative and in uptrends positive.
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Also, it is important to note that signals in the tops and bottoms in the channel lines where support and resistance are occurring are the best places to find these reversal signals and could have the tightest drawdowns.
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