The Trend Trader – What Forex Style Suits You?
Trend trading is a term given to traders who look to take advantage of trending prices betting that the trend will persist for a significant period of time. Traders employing this strategy will typically overlook earlier parts of the move to have confidence that the trend is fully established, minimizing the risk of losing capital from a price reversal.
Famous Trend Trader:
George Soros – The Man Who Broke The Bank Of England
“It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong.”
- George Soros
One of the most renowned trend following traders is George Soros. Soros is known as the “Man Who Broke The Bank of England” due to going short against the Great British Pound by US$10 billion and earning approximately US$2 billion dollars over the course of a month during the Black Wednesday British currency crisis.
This trade is considered one of the greatest trades of all time. UK Treasury estimated the cost of Black Wednesday at £3.4 billion.
UK Treasury estimated the cost of Black Wednesday currency crisis at £3.4 billion
Soros earned approximately US$2 billion during the month of Black Wednesday
5 Facts About Trend Trading
1) Trading The Trend
Trading on currency trends is a suitable approach for short, medium, and long-term strategies.
2) Trend Reversal
The trend trader will typically stay in their position until they believe the trend is reversing.
3) Fundamental Factors
An average trend can be significantly impacted by such factors as central bank intervention or policy announcements. These are referred to as fundamental factors.
4) Directional Movement
The Directional Movement System (DI+, DI-, ADX) is a useful tool for identifying when a significant trend is in motion. Support and resistance points moderate the pace of the trend allowing traders time to reassess their positions. A comparison with support and resistance points can provide an indicator of when to enter a transaction.
5) Double Edged Sword
Trend trading is a double-edged sword. The trader must be aware of the positives as well as the potential for loss should a new trend develop unpredictably.
Trend Trading On MahiFX
Trend following does not aim to predict or gamble on market movements. Instead, the trend following trader looks to interpret signals in the market that a trend is beginning to establish itself and ride it to profit. The trend following trader will then exit the position when they feel a reversal or slow down is imminent.
Trend following tools
The MahiFx platform offers users a number of tools to assist trend following trading strategies. Our real time charts found in the Charting tab offer users a number of trend following indicators, including a choice of customisable Moving Averages, Bollinger bands, Donchian Channels, and the Directional Movement System (DI+, DI-, ADX) amongst others
Our candlestick charting option and Relative Strength Indicator (RSI) indicator can also be useful additions to these primary trend following indicators, helping traders spot key trend turning points.
Over coming months we will be adding additional tools for users to complement our existing trend following indicators.
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