If you are a Forex trader, you must have heard the quote “The trend is your friend” or its popular alternative “follow the trend”, however, if you watch the charts carefully, there seem to be contradictory trends in the Forex market. The question remains, which of these trends are actually your friend, and which of these trends should you follow?
If you are new to Forex trading? Taking our free forex trading course for beginners would be of utmost help to your journey as a Forex trader.
In order to bring clarity to this issue for our students, we answered this question and provided decades of experience in the video below, if you are a visual person, you can watch it now, if not? continue reading as we examine trends in the Forex market in-depth to give you a more befitting answer.
Which trend is your friend? The short answer is that of all the trends in the Forex market? the monthly trend is your best friend. It is the most consistent trend there is and trading with that in mind would give you more wins than losses. Let’s explore why.
We know from historical price data that the monthly chart is the most consistent of all charts in the Forex market. If a trend forms on the monthly chart, chances are, it will follow through to the end, regardless of any chaotic market conditions that might be happening on the lower time frames.
What then do we recommend? To benefit from trends in the Forex market, use the higher time frame as a guide, and only pick trades on the lower time frames that are in similar direction to the trend on the higher time frame.
While a trader scalping on the 5 or 15 minutes chart might benefit from observing and following trends on the 1 hour, or 4 hour or daily time frames, the real probability of success happens when the monthly time frame is considered in these trades.
Types of Trends in the Forex Market
Every time frame seem to have it’s own trend, even the minute chart, has it’s own trends and ranges. This is what makes the phrase follow the trend very difficult for new traders.
However, in pursuing this philosophy “the trend is your friend”, it is in your best interest to consider the most consistent trend in the Forex market and to use it accurately.
When the longer time frame is in an uptrend, only look out for buy set ups, and when the longer time frame is in a downtrend, only look out for sell signals.
Are you a trend trader? Let us know your thoughts in the comments section. If you want a step by step guide, consider watching the video above.