Trading trends is always a popular market approach, with traders looking to take advantage of directional markets. However it can be difficult to not only find but also time entries into those trends.
Not a position trader? Learn more using the link below. Finding a strong directional move is the first priority of any trend trader. However, when having to select a currency pair to trade, it can be difficult to identify the best trends. This can be accomplished through the data source options found in the properties menu. Remember, ADX is not identifying the direction of the trend, only its intensity. If Daily ADX reads over 50, you can then begin to move to the execution phase of the strategy.
Once a strong trend is found, it is time to plan an entry into the market. So far , during the highlighted period, RSI has signaled 3 sample entries for the graph. As ADX is now below 50, no new trading signals should be considered. Traders should always have a plan for managing their position. Eventually trends will come to an end and any existing trades should be exited. When initiating a buy order, stop orders should be placed at a 14 period low on the 4Hour chart.
That way if a new low is created, all existing buy trades will be closed. Conversely if a trader is selling in a downtrend, stops can be placed at a 14 period high again using the 4Hour chart. This means that your limit placement should look for twice the amount of pips relative to your stop. For example, if a sample trade has a pip stop loss, a minimum pip profit target is suggested.
You can catch up on all of the action with the previous articles linked below. Day Trading Market Reversals. Trend Trading with ADX. Interested in learning more about Forex trading and strategy development?
Register here to continue your Forex learning now! DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. Click here to dismiss. Strategy Series, Part 6: ADX can pinpoint strong currency trends RSI can be used to enter with market momentum Risk Management can use previous market highs and lows Trading trends is always a popular market approach, with traders looking to take advantage of directional markets.
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