It is easier to make predictions with a trend than with a trading range. While you
can still profit in trading ranges, you have to be more nimble on your feet, and
ready to jump in and out of the markets at all times. Needless to say, this makes
the trader’s life a lot tougher and the risk for loss greater.
Trading ranges can be really messy and unpredictable, which is why you should
always look for trading trends. It’s a good idea to stay out all together during a
range, and get back in only when the markets start to trend again.
As a general strategy, it is best to trade with the trend rather than against it,
meaning that if the general trend of the market is headed up, you should be very
cautious about taking any positions that rely on the trend going in the opposite
direction.
The trend spotting strategy assumes that the present direction of the price rate
will continue into the future. It can be used in three main time‐frames: short,
intermediate and long‐term, with the trends being different for each.
For example, here’s a possible scenario in the Forex market:
Over the last 12 months the trend for the EUR/USD is an uptrend, over the last 30
days the trend is a downtrend, and over the last 24 Hours (intra‐day) trend is an
uptrend.
Regardless of the chosen time frame, traders will remain in their position until
they believe the trend has reversed.
So the goal is to spot a trend that you believe in and trade according to it.
Needless to say, you will need to monitor the trade, in case you were mistaken
and the trend vanishes or reverses. Then it's time to cut your losses by closing the
losing trade or by reversing ‐ closing the trade and opening a following, opposite
trade.
Warning: Speculating on Forex rates involves great amount of risk. Be advised that
even the most sophisticated traders can't always predict market movements'
directions.
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