Forex trends represent the general market movement. Trend following is essential to making profits and preventing losses. In this article, we are going to talk about how to define the trend and follow it.
If you do not know what a trend is, we recommend reading the What is a Trend and Counter Trend article.
Common Mistakes in Trend Trading
- Entering early.
An early entrance is only good when it is done at the right time. The trend following does no premature stand entrances. This will cut your profits.
- Exiting early.
You might think that an early exit will cut your losses. Yes, it will. But at the same time, you might cut your potential profits too. Analyze the market carefully!
- Messing up with your own rules.
Before going in for serious trading, a trader must come up with some rules he must follow all the time. Breaking your own rules will influence your trades significantly.
- Being scared of placing a trade.
Both beginners and experienced traders sometimes face the fear of opening a trade. This especially happens after a losing streak. The only solution to overcome the fear is to stay away from trading for a while or use a demo market.
- Having no regular trading plan.
Without a trading plan, all your sessions become gambling.
- Managing funds the wrong way.
Managing your money properly is essential to successful trading. If you do not have proper management, then you have a high chance of making critical mistakes.
How to Follow the Trend Properly
The first thing is your plan. The plan must foresee what should you do in a situation when you are at a winning or losing streak. You should control your emotions. This is especially important for trend following ETF and other assets in day trading. Your plan will make you stick to the right way all the time. You can even write down the main points on some sticky notes and put them in front of you to always see them.
After you come up with a plan, stick to it. Do not change anything during the session because this will only bring chaos. Repeating the same thing, again and again, will give you a better understanding of the trading process.
Finally, no matter what the indicators say, always stick to your plan in trend following. Changing the strategies during a session is not the best idea. Lead it to the end!
Range-trading with Trend Following Strategies
A lot of traders want to find a unique strategy that works in all market conditions. That is not what trading is about. Various situations require their own approach. Using a trend following strategy while range-trading is not a good idea. You have a high risk of losing all your funds.
Read the Trend Trading Strategies article to see which tactics are good for you in a trend. Do not try to apply that to a market without a trend!
Remember that the bigger half of all unsuccessful trades has only one reason for failure – the trader did not stick to his strategy. Learn from the mistakes of others and make high profits!