Trend identification

Let's identify a trend that starts with a long term chart like D1, W1. For Day traders will use a lower timeframe, but we need to understand that short-term market movements do not represent the long-term market trend. Meanwhile, the trader needs to evaluate that is the long-term direction of a currency pair.

In the process of trend formation, the market will form bottom peaks, creating waves. If in a trend, the market continuously forms up waves with stronger momentum than downside waves, it is a sign of an uptrend. And vice versa.

Once a trend has been identified, what would be the next step?

Once a trend has been identified, then you should evaluate the following:
  • The momentum of the trend
  • Signs of reversal
If you see a trend that is moving steadily, even though there are small corrections that do not affect the main trend, then you should trade in those trends.

While the trends have weakened momentum and show signs of reversal, you should consider carefully before entering a trade, if possible stay out of the market.

Trading according to the trend

Trend identification and evaluation is not a strategy. That is a necessary condition for you to decide to participate in the trading. When trading in the trend you will have peace of mind that, even if the market has a change, the stop loss order will take care of this part of us. So our job is to catch the trend well and build a strategy.

Regarding trading, you can choose one of the following trading methods:
  • Identifying the price range you will enter into is known as identifying support and resistance. Those are the key price zones that the market can move in and reverse back into the main trend. This trading is called pullback trading.

  • Or the trader can trade a breakout. We also identify important support resistance, as here is usually the previous trough's high. When the price breaks these zones, the trader can trade in the direction of the breakout of the trend.

Cut loss

If you define a trading style that follows the trend of the market, you should consider moving your stop loss towards the direction of the trend when the trend reverses. Because this is a way to help you increase your profits safely. This is an advantage and we should take advantage of it.

To summarize, trend trading includes the following brief steps:
  • Identify trends on large timeframes
  • Check for momentum and reversal signs. If okay, then will join the trading.
  • Identify strong resistance support on large or lower timeframes to trade
  • Identify your entry and exit signals
When we understand the trend trading process, in conclusion, we will find it not too complicated to grasp trend trading techniques.

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