Why Trends Are So Useful?

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Professional traders attain most of their profits from spread-betting during times when the markets are experiencing strong trends. This article explains the very lucrative trading technique of trading with trends. Basically if you can learn how to detect trends and trade with them then you will significantly increase your chances of gaining consistent profits from your spread betting activities. In addition, if you perform this task by studying charts based on the higher timeframes from the daily upwards, then you will be trading in such a way that would be the equivalent of swimming with the tide. This is because you will be opening spread bets in the same direction as the current market forces.

 

Identifying Bearish trends

You should commence this activity by searching for daily trading charts that exhibit the strongest bearish trends. For instance, you should easily be able to detect if an asset is advancing within a downward channel because it will be depreciating in value by producing a sequence of lower lows and lower highs. In addition, you should also be able to confirm that price is fluctuating between upper and lowers trendlines which will be angled downwards. If you cannot readily identify these key features of bearish trends on your selected chart then you should dismiss it and proceed to search for other more easily recognizable samples.

Once you have successfully detected any bearish trends, you will find that the best way to trade them is to sell on rallies. Basically, this means that you should wait and open a new short spread bet when price bounces against the upper trendline. You should also protect your new position by placing a stop-loss order about ten points above the highest values that price has hit during its current rally.

 

Identifying Bullish Trends

You can utilize an opposite strategy when you trade bullish trends. You can start once again by searching for those daily trading charts that exhibit the strongest bullish trends. You should easily be able to detect if an asset is advancing within an upward channel because it will be appreciating in value within a well-defined course. In addition, you should be able to confirm that price is fluctuating between lower and upper trendlines and that it is generating a series of consecutive higher highs and higher lows. If you cannot readily identify these key features of bullish trends on your selected chart then you should search for other more clear-cut samples.

Once you have successfully identified any bullish trends then you will find that the best way to trade them is to buy on dips. Basically, this means that you should wait and buy when price bounces against the lower trendline.  You should also protect your new long spread bet by placing a stop-loss order about ten points beneath the lowest value that price recorded during its latest pullback.

 

Analyzing Forex Trends using Multi Time Frames

This powerful technique used to analyze trends involves evaluating assets by studying trading charts comprising a number of different time frames.  The prime advantage of this method is that you can acquire deeper insights into which direction the price of an asset is most likely to advance if you analyze it using charts displaying a sequence of shorter time frames.

You will find that traders normally tend to choose three time frames when performing the task of analyzing trends. Their exact choices are normally dependent and based on their own particular trading styles. For example, longer-term traders usually opt for the Weekly, Daily, and 4-hourly trading charts.  The prime objective is to identify the direction that an asset will most likely to advance using the longest timeframe and then study the shorter ones in order to identify the optimum opening positions for new spread bets.

The main concept of this method of analyzing trends is based on the theory that trends exist within trends. However, you should be aware that you could detect a downtrend on the daily chart but an uptrend on the hourly one for the same asset. Under such circumstances you must learn to appreciate that the longest timeframe always specifies the real trend. As such, you can conclude that price is experiencing a retraction on the hourly chart before it resumes the dominant down direction that is prevalent on the daily chart.

Consequently, your spread betting strategy would be to identify the best opening position for a new spread by detecting when this retraction begins to peter out and when price recommences moving in the direction of the major trend, as identified on the chart using your largest timeframe selection. As such, if you analyze trends by studying charts using multiple time frames then you can obtain a better feel for identifying the optimum entry points in the direction of the current trend. Remember that the prime objective of Multiple Time Frame Analysis is to utilize the lower time frame charts to help you select the optimum entry points for new spread bets.

 

Why you should trade Trends

You will optimize your chances of acquiring consistent and worthwhile profits if you trade with trends because you will then benefit form market momentums that are moving in the same direction as your spread bets. You should be aware that it is possible to attain winning positions by trading against trends but that you will be then stacking the odds against yourself. This is because you will then experience more difficulty in selecting potentially successful positions on a consistent basis because your risks per spread bet will dramatically increase.

An important concept that you must drum into your head is that as spread betting is quite an involved subject, you must always seek methods of reducing your risk exposure as one of your top priorities. One powerful method of achieving this objective is to trade with trends.  By learning how to utilize trading strategies that allow you to do this, such as the one described above, you will greatly increase your chances of spread betting successfully.

 

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