Trending markets tend to make strong moves in the direction of the trend followed by periods of consolidation or a counter-trend retrace before the next leg in the direction of the trend. A trend is not actually a strategy by itself; it is just an added point of confluence that increases the probability of a trade. However, just randomly jumping in with a trending market is not an edge or a strategy.
Traders enjoy trading trends to take advantage of extended directional market moves. This is especially true in the forex market where trends can last for days, weeks, months, or even longer. If a trader can find the direction of the trend, it can exponentially increase the likelihood of having a successful trade. Once a trend is found, traders can choose from a variety of tactics to enter into the market. One of the easiest ways to enter into the market is through the use of a breakout.
The first thing to know is that by only trading in the same direction as solid trends, you have won more than half the battle. Trading with the long-term trend is more important than the exact entry strategy you use. Too often traders focus exclusively on the tricks of entry. Entries are important, but trading with the good trends is more important! The best way to enter trades in forex is to wait for a pull-back (a move against the trend). Then, enter in the direction of the trend once the price has begun moving in the direction of the trend.
Trend following is perhaps the most popular long-term strategy in all financial markets. As a trading strategy it is exceedingly effective and profitable when the conditions are favorable, is quite straightforward in its methodology, and there are many individuals, past and present, famous or obscure, who have used this strategy to success and riches. We should note that the technical aspect of trend following is in fact quite simple, but also that it requires, before everything else, discipline, sound money management, and patience from the trader. Trend following is not a short-term method, and patience and determination are as important as correct analysis as a result.
There is never anything concrete with trends…meaning you never know how long they will last for, so try to take advantage of them when they do occur. Trend trading is the most popular trading strategy used in the financial markets and it involves identifying long-term tendencies either higher or lower. Using tools like moving averages, MACD, and RSI, trend traders can identify trends, determine their strength, and identify potential areas of reversals. These strategies usually involve longer holding periods and more certainty.