• Home
  • About
  • Contact

Forexobroker

Download Our Forex Strategies and Indicators

  • Daily Forecast
  • Tradingview Tools
  • Courses
  • Metatrader 4 Indicators
    • Free Metatrader Indicators
    • Paid Metatrader Indicators
  • Metatrader 4 Systems
    • Free Metatrader Systems
    • Paid Metatrader Systems
  • EA’s
    • Paid Expert Advisors
  • Forex Brokers

How to Trend Trade Price Action

September 10, 2016 by Dominic Walsh Leave a Comment

Most traders have heard of the commonly used saying “The trend is your friend, until it bends”. In our traders community we are always encouraging new traders to only make trend trades because this is one of the very few Forex sayings that is entirely accurate. What many traders have a problem with is that they know they should trade with the trend in their favour, but more often than not they find themselves entering trades fighting it.

The reasons traders quite often trade against the trend are because of two simple reasons;

  • They don’t know how to identify a trend
  • They love to pick the tops and bottoms of markets

To answer these questions each trader must work out what sort of time frame they are looking to trade for. We are not looking to catch major swings in the market that last for weeks and months, but rather trade swings from one level to the next. With this in mind we know we are looking to trade with the short-term trend in our favour. We are not zooming our charts right out to ascertain the long-term trend because we are not looking to trade with the long-term trend. The chart below is an example of what we term a market swing. This chart has been in an up-trend higher and the swing is from the low to the next high. To get on the right side of these shorter-term swings within the trend, traders need to be looking for the short term trends.

1pic

Below is attached a chart example highlighting two different trends. On this chart you will note there is both a longer-term and short-term trends. Those traders who are looking to trade on the daily charts and hold trades for long periods at a time would be looking to trade in-line with the long term trends. Traders that trade like Forexobroker and are looking to trade from one swing point to the next would be looking to trade with the short term trend in their favour to ensure they are on the right side of the market for the next swing in the market.

The best trends to trade with are the trends that are both strong and obvious. These are the trends that when you flick to the chart, you straight away notice price moving strongly either higher or lower. If you’re unsure if there is a solid trend in place, the chances are that price is not in a trend. If the trend is strong and obvious a five year old will be able to point it . These simple trends that stand out are the trends that often produce the biggest winning trades with the lowest risk.

SUPER IMPORTANT: Every time frame chart you trade needs to be analysed and traded individually. For example if you are trading the 4hr chart you trade within the current 4hr charts trend, you do not trade with what the daily charts trend is doing. This is very important. Every chart has their own trend. The weekly can have a completely different trend to what the 4hr chart may have. Treat each chart as individuals.
mytop10indicators

Download My Latest Top 10 Developed Trading Indicators

How Can We Spot a Trend Change?

A very reliable method that can help traders spot trend reversals with price action is known as the 1,2,3 pattern. This pattern is especially useful for spotting short-term trend reversals and can help traders looking to trade the short-term swings get on the right side of the trend.

Many traders use moving averages to try to identify trend reversals. The problem with this is moving averages are built from using old historic price and by the time they show a trend has reversed, price has already moved and is off and gone. Using price action as it is printed ensures that traders are right on the ball and able to catch the trend much earlier than if they used indicators.

12pic

Using the 1,2,3 for Spotting Trend Reversal

This pattern is very simple and yet effective at showing a change in order flow for the next trend. This pattern is all about watching the market make an initial reversal followed then by confirming with a fresh high or low.

The first step in the 1,2,3 pattern or the 1 in the pattern is the first leg of the reversal. For example; if we are in an up-trend the 1 would be the first leg lower to make a new lower low (LL). The number 2 or the second leg of the pattern is price retracing, but not making a fresh high or low. So for the current up-trend example the first leg moves lower and the second step is price moving back higher, but NOT making a new high. Instead, step two needs to make a new lower high (LH). If price does go onto make a new high, the up-trend Is still in play. For the last leg of the pattern or the 3, price again moves lower, moving past the new low that was made from the first leg and going onto to make a new lower low.

That may sound very confusing, but the chart below explains this clearly with a price action chart. For this example price was in an existing up-trend and for the trend to change we are looking for a 1,2,3 back lower. The first leg of this trend change is price making a new lower low highlighted by the number 1 on the chart below. The next step of this pattern is price retracing and making a new lower high. It is crucial price in this second step does not move up higher to make a new high, otherwise that would be confirmation for the trend to continue higher. The last leg of this pattern and also confirmation that the short-term trend has changed is leg 3 which is price moving back lower again to make a new lower low. This involves price moving lower and past the first low to make a new low.

13pic

The 1,2,3 pattern can be used for spotting changes in both up and down trends. The example above is of an up-trend changing to a down-trend. The example below is the opposite of an down-trend changing to an up-trend with the 1,2,3. For this trend reversal we need to see a new higher high, followed by a new higher low and then for price to make a new higher high for confirmation the trend has changed. See the chart below:

14pic

Where to Enter into Trends | This is Critical

One of the critical teaching points of Forex School Online is getting traders to start trading from value areas and at the correct swing points. Unfortunately a lot of traders are entering the market every day from areas that are putting themselves on the wrong side of the market. To enter from value areas traders need to trade from the correct swing points and this is even more critical when trading with the trend.

When looking to trade with the trend on their side traders need to enter from strategic areas rather than just spotting a trend and jumping aboard. The strategy used to enter with the trend is known as riding waves or entering on market retracements. For example, if price is in an up-trend traders can enter from value areas by waiting for price to retrace lower and make a new low.

In all markets price has to move up and down. No market moves either straight up or straight down. Price needs to rotate to find new orders to continue to move. If price is in an up-trend, price will move up before at some stage moving lower, before then continuing on to make a new move higher. From an order flow perspective this move lower in an up-trend is often created from the traders who made profit from the move higher taking profit. As these traders take profit the price moves lower. If at this low point new orders come in to buy, price will again move higher and the trend will continue. It is at these rotations that traders can target value areas to enter the market. This strategy works the same way for both up and down trends.

The chart below explains this pattern with price in an up-trend. You will note price has been continually moving higher followed by a rotation lower and then the price continues higher with the up-trend. It is at these rotations lower in to swing lows that traders can find trades that are from value areas.

15pic

Putting it all Together

The final step when looking to trade with the trend is using high probability price action setups to make strategic entries. High probability price action reversal setups include:

–          The Pin Bar Reversal

–          The Engulfing Bar

–          The 2 Bar Reversal

I really hope you enjoyed this article and more importantly can put it to use in your own trading to make high probability and low risk trades. I know from personal experience learning to trade with the trend rather than against it can be a turning point in a trader’s career.

Our community traders work with XM.com brokerage company. If you are thinking to open demo or real forex trading account we recommend XM. They currently offer up to 5000$ bonus on your deposit find details below:

Open Forex Account

 

Open Forex Account

Filed Under: Dom's Forex Course

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

  • Email
  • Facebook
  • Instagram
  • LinkedIn
  • Pinterest
  • RSS
  • Twitter
  • YouTube
Forexobroker

Archives

  • February 2023 (1)
  • January 2023 (6)
  • December 2022 (7)
  • November 2022 (19)
  • October 2022 (20)
  • September 2022 (27)
  • August 2022 (13)
  • July 2022 (4)
  • June 2022 (2)
  • May 2022 (2)
  • April 2022 (3)
  • March 2022 (5)
  • February 2022 (3)
  • January 2022 (5)
  • December 2021 (1)
  • November 2021 (3)
  • October 2021 (3)
  • September 2021 (2)
  • August 2021 (1)
  • July 2021 (1)
  • June 2020 (7)
  • May 2020 (6)
  • April 2020 (7)
  • March 2020 (7)
  • February 2020 (10)
  • January 2020 (3)
  • November 2019 (1)
  • September 2019 (3)
  • August 2019 (3)
  • June 2019 (1)
  • December 2018 (1)
  • November 2018 (4)
  • October 2018 (9)
  • September 2018 (11)
  • August 2018 (5)
  • July 2018 (6)
  • June 2018 (3)
  • May 2018 (6)
  • April 2018 (2)
  • March 2018 (9)
  • February 2018 (8)
  • January 2018 (10)
  • December 2017 (10)
  • November 2017 (14)
  • October 2017 (3)
  • September 2017 (3)
  • August 2017 (13)
  • July 2017 (25)
  • June 2017 (21)
  • May 2017 (20)
  • April 2017 (21)
  • March 2017 (15)
  • February 2017 (16)
  • January 2017 (18)
  • December 2016 (11)
  • November 2016 (21)
  • October 2016 (63)
  • September 2016 (24)
  • August 2016 (22)
  • July 2016 (16)
  • June 2016 (16)
  • May 2016 (16)
  • April 2016 (23)
  • March 2016 (29)
  • February 2016 (22)
  • January 2016 (22)
  • December 2015 (29)
  • November 2015 (28)
  • October 2015 (29)
  • September 2015 (41)
  • August 2015 (52)
  • July 2015 (47)
  • June 2015 (55)
  • May 2015 (50)
  • April 2015 (58)
  • March 2015 (22)

  • Home
  • About
  • Contact

Categories

  • Daily Forecast
  • Tradingview Tools
  • Courses
  • Metatrader 4 Indicators
    • Free Metatrader Indicators
    • Paid Metatrader Indicators
  • Metatrader 4 Systems
    • Free Metatrader Systems
    • Paid Metatrader Systems
  • EA’s
    • Paid Expert Advisors
  • Forex Brokers

Visit Our Forex Strategies And Forex Indicators Below:

Forex Trading Strategies

Free Forex Indicators

Paid Forex Indicators

Paid Forex Strategies

“Our order process is conducted by our online reseller Paddle.com. Paddle.com is the Merchant of Record for all our orders. Paddle provides all customer service inquiries and handles returns.”

© 2015-2023 Forexobroker

Copyright © 2023 · Magazine Pro Theme on Genesis Framework · WordPress · Log in