Forex Trend Trading With a Simple Moving Average
By Nathan Navachi
While many new forex trading systems are based on complicated mathematical market analysis models, some of the most effective forex trading strategies are also the simplest. One of these simple and highly effective strategies is trend trading, where you simply see which direction the market is trending in and then you trade in that direction. If you were trading the EUR/USD currency pair, the way that you could identify the direction of the trend is to open up a daily chart and overlay a simple moving average on the chart. If the direction of the moving average is up, then the pair is in an uptrend; if the moving average line is down, there is a downtrend; and if the line is horizontal then there may be no trend.
Trend trading is a proven way to earn profits in the forex market since it is an established fact backed by decades of market research that currency pairs (and indeed literally all markets) move in trends. If the trend is up then it makes sense to buy, if the trend is down then it makes sense to sell, and if there is no trend then it may not be a good time to trade. The best way to get an accurate sense of the overall trend is to look at a long-term price chart such as a daily, weekly, or monthly chart and see which direction the moving average line is pointing. While it may not be practical to use a monthly chart for trading signals, it can let you see in a quick glance where the market has been and where it will be headed if the trend continues.
It is a general rule of interpreting trading signals that the longer the period of the price chart is, the more reliable the trading signal will be. This strategy of determining the trend and then trading in that direction could be used on a chart as small as a one minute candlestick chart or as large as a daily or even weekly chart if you are really a long-term trader. Now while trading signals from long-term charts can be more reliable, there is also larger risk involved with keeping a trading position open for days or weeks at a time. If you plan to trade on these types of longer time frames, be sure to factor in the amount of leverage you are using as a function of how many pips you are willing to risk on a loss.
On the short-term side, this strategy can be used on a 1-minute or 5-minute chart but the signals may not be as reliable and the trend itself may be erratic and rapidly changing. It is common sense that the steepness of the moving average line indicates how quickly the market is moving up or down, and if you can identify a fast moving trend on this type of price chart then you open yourself up to large gains if you can enter in on the right side of the market and ride the trend for as many pips as possible before the market retraces itself.
The easiest way to learn forex trading is by watching videos. Go to this YouTube video and watch a video commentary for this article.
Nathan Navachi is a professional trader who built http://TheCurrencyMarkets.com as a valuable resource to introduce the world to the forex market.
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Video duration: 233 seconds Helllooo World and Good Morning, Markets up slightly but with some over head resistance to deal with that I show you in this video. Durable Goods orders out which has put a bit of pressure on ths market staying in the positive. |
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Morning Report 04/23/09 FreeTradingVideos.com Posted by: breakouttrader
Video duration: 352 seconds Good Morning Traders, Markets are in upward motion in the premarket action. Let's see if we can get some follow through. Still looking for a pullback on the weekly chart. This market is doing a great job of holding up. |
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Morning Report 04/21/09 Freetradingvideos.com Posted by: breakouttrader
Video duration: 318 seconds Good Morning Traders, Not a much to report. Looks to be a continuation of yesterday's down day. I have noted the support areas in today's video so check it out and make sure to be back at noon for Matadors intra day recap. |
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Morning Report 04/20/09 FreeTradingVideos.com Posted by: breakouttrader
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Video duration: 213 seconds We have CPI release at 8:AM. That will move the markets. basically flat for now. Keep an eye on the US dollar and se if we can't get in to some commodity related positions. Check out Matador at noon and D7 for the Post market. |
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Video duration: 172 seconds Short and Sweet this afternoon. Taking a quick look at the S&P technical Analysis and where the market were trading near the close of the day. |
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Post market Report 04/13/09. FreeTradingVideos.com Posted by: breakouttrader
Video duration: 493 seconds Not to much to report as Traders are waiting for news to start releasing over the next couple of days. Kicking off with Citi in the morning and the PPI report. Talk to you in the morning. Breakout |
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Morning Report 04/13/09 FreetradingVideos.com Posted by: breakouttrader
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Morning Report 04/07/09 FreetradingVideos.com Posted by: breakouttrader
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Morning Report 04/06/09 FreeTradingVideos.com Posted by: breakouttrader
Video duration: 256 seconds Hello World, Very Little to report for the coming week based on economic news. Check out the technical analysis on the S&P weekly and have a great and successful trading week. |
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Morning Report 04/03/09 FreeTradingVideos.com Posted by: breakouttrader
Video duration: 337 seconds Hello World, We had RIMM in the overnight come out with good earnings.We had the unemployment numbers this morning come out at -663 000. Unemployment was at consensus of 8.5%. Nice pop in the market on the news but now retraced the move. |
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Morning Report 04/02/09 FreeTradingVideos.com Posted by: breakouttrader
Video duration: 266 seconds Markets have a nice pop in the premarket after the world markets did well. We will be awaiting the news on the mark to market amendments as this is a major factor to the credit crisis. Stay tuned for Matador's video at noon as you don't want to miss it. |
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Morning Report 04/01/09 Freetradingvideos.com Posted by: breakouttrader
Video duration: 249 seconds Hello World, Looks like we are in for another choppy day trying to determine the direction of the market. Be careful holding into tomorrows market with the mark to market accounting rules being amended. Have a great and successful trading day. |
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Video duration: 138 seconds Good Morning World, The world markets did very well over night considering we dropped 3% yesterday so that has the market opening higher. We held the 50 MA yesterday and look to be bouncing to the upside based on premarket activity. |
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Morning Report 03/27/09 FreeTradingVideos.com Posted by: breakouttrader
Video duration: 220 seconds Hello World, Markets are under a little pressure this morning. It may be the start of the pullback I am looking for and have been waiting patiently for. |
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Morning Report 03/26/09 FreeTradingVideos.com Posted by: breakouttrader
Video duration: 183 seconds Hello World, Future are pointing to a higher open in front of the GDP report this morning with the NASDAQ leading the way. The GDP report may turn the futures around or add to the gains. Have a great and successful trading day. |
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Video duration: 203 seconds Hello World,We are flat on the futures this morning so no early indication on the direction of today action. A pullback to load up on the long side would be great, if we get a break out above the high that means this rally has probability to continue. |
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Video duration: 262 seconds Good Morning World, Futures point a little lower this morning. This is common after such a big day to see profit taking come to market. No major news events today. Have a great and successful trading day. |
