In the forex faq this week, I am going to share with you some tips on how to profit from trading short term forex trend.
Below is the question from one of our fellow traders
What is the best method (or methods) for determining short-term trends, up or down? And what would be the best methods for capitalizing on the price moves during short-term trends?
There are several ways you can use to determine the short term trend of the market. First of all, you will need to open a short term chart like the 5 minutes or 15 minutes chart. Next you will have to make use of the 200 EMA to tell the trend.
In order to tell the trend of the market, you can do so with the gradient of the 200 EMA. When the EMA is sloping upwards with good gradient, it is a sign that the market is in a strong uptrend. However if you see the 200 EMA with flat gradient, it is a sign that the market is in consolidation. For those of you who has the trend scanning software that I have recommended you before, you can use it to tell the trend easily.
To find out more about how to tell the trend of the market, you can read this post that I have written some time back.
As for how to capitalize on the short term trend, I will suggest you to go for BUY THE DIPS & SELL THE RALLY trading system.
When you are in an uptrend, you should be waiting for the price to produce a dip and then enter a BUY trade.
When you are in a downtrend, you should be waiting for the price to produce a rally and then enter a SELL trade.
Basically this BUY THE DIPS & SELL THE RALLY system is a trend trading technique. My personal suggestion to all of you who are new to trading is to trade in the direction of the trend. This is because riding the trend can give you more winning percentage and better risk reward ratio.