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.
Article Source: http://EzineArticles.com/?expert=Nathan_Navachi
http://EzineArticles.com/?Forex-Trend-Trading-With-a-Simple-Moving-Average&id=2690813
Video scenes shots:
Watch the video:
| URL: | |
| Embed: |
Other videos by this author:
 |
Join DailyFX Currency Analyst as he covers the European Central ... Posted by: DailyFXNews
Video duration: 1428 seconds Join DailyFX Currency Analyst as he covers the European Central Bank interest rate decision. |
 |
Technical Outlook for Major Currencies - February 3, 2012 Posted by: DailyFXNews
Video duration: 334 seconds Keep a close eye on EUR-USD 1.3235 and 1.3025. A break and close above or below these levels will be required for clearer directional insight. |
 |
Technical Outlook for Major Currencies - February 1, 2012 Posted by: DailyFXNews
Video duration: 213 seconds The key level to watch in Wednesday trade will be 1.3040 in EUR-USD. A close below will open the door for additional weakness and a bearish resumption. However, inability to close below 1.3040 will keep the current 2012 correction intact. |
 |
Technical Outlook for Major Currencies - January 31, 2012 Posted by: DailyFXNews
Video duration: 102 seconds The Euro is showing evidence of the nexty major lower top but we still would not discount the potnetial for a ush higher towards the 100-Day SMA by 1.3370 before underlying downtrend reasserts. |
 |
Technical Outlook for Major Currencies - January 30, 2012 Posted by: DailyFXNews
Video duration: 424 seconds Monday could be a key reversal day for many currencies, with the US Dollar finally looking like it could be ready to re-establsih bullish momnetum. |
 |
Technical Outlook for Major Currencies - January 27, 2012 Posted by: DailyFXNews
Video duration: 272 seconds A bearish gravestone doji in Eur-Usd on Thursday is sending the message that this market could finally be looking to roll back over. However, at this point it is still too early to call for the next lower top. |
 |
Technical Outlook for Major Currencies - January 25, 2012 Posted by: DailyFXNews
Video duration: 200 seconds Euro remains bid on dips and next key level to overcome by the upper bollinger and 50-Day SMA. A break above will then expose the 100-Day SMA in the 1.3400 area. |
 |
Technical Outlook for Major Currencies - January 24, 2012 Posted by: DailyFXNews
Video duration: 211 seconds Euro looking to now establish above 1.3000 and still see room for additional gains over coming sessions towards 1.3200-1.3500 area. |
 |
Technical Outlook for Major Currencies - January 23, 2012 Posted by: DailyFXNews
Video duration: 264 seconds Risks remain for Euro upside over the short-term and we see gains extending into the 1.3100-1.3400 area before considering the possibility of bearish trend resumption. Aussie and Kiwi are looking stretched however, and here we see risks for more immidiate downside. |
 |
Trading During Asian Hours - David Rodriguez | FXCM Expo 2011 Posted by: DailyFXNews
Video duration: 1740 seconds http://fxcmexpo.com Many traders avoid Asia session hours due to slow currency moves and lack of excitement. Finding more trading opportunities can be exciting. Join David as he details key strategies that can help you trade during slower-moving Asian trading hours. |
 |
Technical Outlook for Major Currencies - January 20, 2012 Posted by: DailyFXNews
Video duration: 429 seconds the Euro has finally begun to correct and we see risks over the short-term for additional gains into the 1.3100-1.3400 area before bear trend resumtpion. |
