If you look at any forex chart, you will see long term trends and here is a simple forex trading strategy for turning them into profits.
Learn How to Use Breakouts
The first point is most new trends and continuations, start from new market highs.
If you want to make money then you need to buy breakouts.
Most traders make the mistake of waiting for prices to pullback to get in at a better "price" but the move doesn't in most instances it continues, so you must learn to buy breakouts - if you want to get on the side of the big trends.
Not all breakouts have the same odds of success and you need to be selective in your choice to catch the best ones.
Generally, a breakout is valid if the breakout point, has been tested several times (the more times the better) and if this has occurred in different time frames which are spaced wide apart, that adds to the validity of the resistance.
You are generally looking levels the market participants consider important and when the level breaks look to go with the breakout. You don't just buy though, you need to check momentum.
Momentum indicators are discussed in our other articles but they simply allow you to gauge the strength of momentum and if its rising then chances are the breakout is valid and will continue. You only need one or two to confirm and our favourites are the RSI and stochastic. There visual indicators and easy to learn and apply.
Applying the Stop
Applying the stop is easy it's under the breakout as the previous resistance broken will now act as support.
The Key to Making Triple Digit Gains!
Is how you trail your stop remember if you have had a valid breakout chances are it will last a long time weeks or months and you need to stay in the trend. Most traders get so excited when they have a profit; they want to lock it in and protect it and move their stop up to quickly. They then get knocked out of the trade by random volatility, get a marginal profit next, then they see the trend sail on over the horizon, piling up thousands of dollars in profit and their not in!
Keep your stop back and trail it slowly.
You need to give the market room to breathe and accept drawdown in the short term and keep your eyes on the bigger long term prize, when you bank.
A good way to do this is by using key moving averages.
Generally dips to the 20 day are areas you can load up more trades in the direction of the trend and the 40 day MA, is a good area to have your stop in line with nearby trend line support as its outside of random volatility and will keep you in the trend.
Sure you give a bit back at the end but if you got 50% of every major trend you would be very rich.
A Simple, Time Efficient Way to make Triple Digit Profits
The above is a simple way to make money from long term trends and I know traders who make 100% annual gains doing the above. Another advantage of this type of trading is it takes less than 30 minutes a day. You also don't have to worry about watching prices all the time and you don't have to trade often.
Long term trend following can be very profitable if you follow the above tips and there easy to do.
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