After losing a lot of money with risky reversal trading strategies, I have just understood the saying of the traders who make money from the Forex market: “Trend is my friend”. This is a metaphor in which the trend is a friend who will bring us money when we realize and follow it. This article will review the process of making $2500 when trading following the trend in the Forex market of Olymp Trade.
This is also the most effective strategy that helps me make money in Forex.
Review on Forex orders in Olymp Trade
How to open a Forex trading order following the trend in Olymp Trade is as follows:
Open UP orders when: The uptrend is the main trend. The price retests the support zone.
Open DOWN orders when: The downtrend is in progress. The price retests the resistance zone.
Conditions: Set up the MA indicator in Olymp Trade. The candle time period is 5 minutes.
Invest $500 in each order with a stop-loss at 50% and take-profit at 100%.
The assets of EUR/USD
Notes: A support will become a resistance after being broken out and vice versa.
1st order: The uptrend was stable. Opened a Buy order when the price broke out of the level (resistance) and then retested the (support) point just passed.
2nd order: The uptrend was stable. Opened a Buy order when the price broke out of the resistance and then retested the level (which had turned into a support zone) just broken.
3rd order: There was a strong downtrend. Opened a Sell order at the resistance zone when the price retested.
4th order: A downtrend was defined when the following peak and trough were lower than the previous peak and trough respectively. Opened a Sell order when the price retested the resistance.
5th order: The price was in a downtrend. Opened a Sell order when the price retested the resistance just passed.
How to identify trends in the fastest way
You can see how high profits are when there are trendy trades. To make money in Forex, first, you need to identify the main trend. Here, I will introduce you to the 3 most effective ways of identifying trends.
Use MA to determine the trend
MA includes 3 basic lines as follows: SMA, EMA, WMA. But here, I will guide how to determine the trend using SMA and EMA.
(1) SMA is a simple moving average calculated by the average of the closing prices over a given trading period. SMA is used to determine long-term trends very precisely.
(2) EMA is an exponential moving average calculated by an exponential formula, which focuses on the latest price movements. Therefore, EMA is quite sensitive to short-term fluctuations. It recognizes abnormal signals faster than SMA and helps investors react faster to short-term price movements.
Use the trendline to identify trends
The concept of a trendline is a vague concept. It shows the subjectivity of traders and almost has no unity. Therefore, regarding the trendline, “so many men, so many minds”, so no one sees it the same way as anyone. It is very difficult to give the most precise definition.
But basically, a trendline is a line that connects bottoms to form a support line (in an uptrend) or peaks to form a resistance line (in a downtrend). They are used to signal current trends and also to predict when a trend will change. In addition, the trendline also acts as support and resistance levels. It provides traders with opportunities to open or close a position during the trade.
How to draw a trendline to identify a downtrend:
How to draw a trendline to identify an uptrend:
Notes on the trendline
The trendline is never horizontal. It must always be diagonal.
There are only two types of trendlines: down trendlines and uptrend lines. When a market is sideways (the trendline is horizontal), it is not considered a trendline.
A down trendline shows that the market is in a downtrend. If it is broken, it is very likely that the market will change its trend from bearish to bullish.
An up trendline shows that the market is in an uptrend. If it is broken, it means that the market will change from bullish to bearish.
It takes at least 2 peaks or 2 troughs to draw a trendline. However, we need a third peak or trough to confirm a trendline. Thus, there will be a confirmation of the trend when the price touches the trend to create a third peak.
The steeper the trendline is, the lower the reliability and higher the possibility of a breakout becomes.
Basically, the more times the price touches the trendline, the more valuable it is. Because many traders will use them as support or resistance levels.
Recognize through a Japanese candlestick chart
This is the simplest way to identify a trend without any indicators when looking at a Japanese candlestick chart.
Bullish trend when: The previous peak and trough are higher than the previous ones.
Bearish trend when: The following peak and trough are lower than the previous ones
What is a reasonable entry point?
For traders who make money from Forex, going against the trend is considered taboo. So, determining the trend and opening orders following it is what they have to do in trading.
To open an UP order, the asset you are trading must be in an uptrend. If the price creates a new peak and retests the new level (support), it is the safest time to open an UP order.
When you want to place sell orders, a downtrend is indispensable. When the price penetrates the support and retests the level (resistance) just passed, it is time to open the order.
Now you can understand the conditions to open a trendy order. Practice it on a Demo account and learn how to identify a trend smoothly. If you identify a trend incorrectly, your entry method may also be incorrect from the start. Remember that when the price retests the level just passed (resistance or support), it is an opportunity to open an order following the trend.
In one word
The vast majority of traders who make money from Forex always have trendy trades. If you do the opposite, you may still make money. However, the risk that you would lose money is quite high. Once you go against the trend, there will be times when you will be trampled mercilessly. Keep your investments in a safe zone. Forex trading orders will yield a high return if you can catch the correct trend in Olymp Trade.