In the forex faq for this week, we have a question from one of our fellow trader asking about the forex trend strategy.
Below is the question:
I have a question regarding to the trend strategy. You mentioned in the video that we should use 200EMA to determine the trend, what if the 200EMA on 1 hour chart is slightly upward but on 4 hour chart is downward?
To have an alignment of the 200 EMA on all time frame is very difficult. Therefore you have to decide on which time frame you are going to trade with.
If you have decided to use the hourly chart to trade, you will only be interested in the 200 EMA on your hourly chart. What you see on the higher time frame can be used as a guideline on where to place your target profit.
If the 200 EMA on the 4 hourly tells you that the price is in strong downtrend while the hourly chart tells you that the price is in strong uptrend.
You will have to set your stop loss to a lower level as there is a high chance that what you are experiencing on the lower time frame is just a retracement on the higher time frame.
If you have the 200 EMA both aligned on both time frame, you can then set your target profit to a greater level as the price will most likely move in the trend for a longer period of time.