mortagesandforeclosures

by Ahmad Hassam

It is very important for you as a currency trader to identify and understand a trend in forex because they tend to be vicious and one way. FX trends routinely wipe out speculators like us who commit the trading sin of trend fading.

Forex trends start slowly and are usually the result of another action in the global capital markets. A booming stock market may lead to a massive forex trend in its wake as an example.

Similarly, a global recession may force investors to take refuge in save haven currencies like dollar in their flight towards safety. Likewise, decrease in interest rates will force carry traders to become risk averse.

So you will have to keep one eye on the global macro situation developing to look in which direction smart money is going to flow. Most of the trends in forex markets are fundamentally driven by the direction of smart money flow.

The longer the trend is going to be, the longer the correction and the consolidation will be. In other words, fundamentally driven trends do not take sudden U-turns.

But when the public realizes that a trend has developed, it is always too late. The professional traders and hedge fund have long been in the trade and are ready to unload their positions on the retail crowd.

As the saying goes, a Newsweek cover is a kiss of death for a trend. Trends are important for an individual investor to understand.

Always remember, trend is your friend. Trend trading is one of the popular trading strategies used by professional traders including hedge funds.

The best strategy is to take a position in the direction of the trend. You can easily identify a trend in currency markets using multiple time frame analysis involving moving averages.

Once you have the trend identified, use Fibonacci retracement levels to enter and exit the trade. If you successfully execute this strategy, you can make a few hundred pips in a week.

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading and swing trading stocks and currencies. Know These Forex Broker Games. Try Netpicks Forex Signals Free.

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