Forex Trend Following - 4 Simple Steps to Catching the Mega Moves

If you want to make money from global FX, then the best profit potential comes from long term forex trend following and this means catching and holding the mega trends that last for weeks, months or years. You will see them on a forex chart but what the best way to catch them? Let's find out...

Were going to use a simple 4 step system, if you want to make forex profits it's worked and has always worked. This forex trading strategy will put the odds on your side and will ensure you catch every BIG move.

This system is simple and you need to understand this fact - all the best systems are. Forget expert trading systems, neural networks or lots if indicators - simple systems work best as they are robust and with fewer elements to break in the face of brutal ever changing market conditions.

Let's start with a simple fact:

If you want to make money forget "buying low and selling high" - you will miss all the big moves. Instead look to "buy high and sell higher" and for this you need to understand breakouts. Breakouts are simply breaks of important support or resistance levels on a forex chart. Most traders can't buy these breaks.

They want to hold on and wait for the price to come back to get in at a lower "better" price and of course prices don't pull back - they continue. The losing trader then watches these moves sail over the horizon and he's not in!

Make sure you don't make the same mistake. Right lets look how to catch and make forex profits from breakouts.

Step One - The weekly chart

This gives you the big picture look for levels of support that have been tested at least twice (the more the better) and are in two time frames (the wider apart the better), these are levels that are deemed important by the market.

Step Two - Look For the same levels on the daily chart

You are going to time your trading signal off this chart, so look levels that are the same or close to the weekly levels - now wait for the price to break.

Step 3 - Is the break valid

Not all breakouts continue, some are false, so wait for the break and check momentum. You want to ensure the break is strong.

We don't have time to discuss momentum oscillators here - but you should use one or two to confirm the break and the stochastic and Relative Strength Index (RSI) are good ones to use. If there in line with the break - go with it.

Step 4 - Protection and Following the move

The stop loss is obvious - behind the breakout point. Now when the break occurs, if it is a good one it will accelerate - as stops are hit and fresh buying comes in, as the supply and demand situation changes - WAIT.

DO NOT trail your stop up to quickly.

You want the move underway and you need to ignore volatility in the short term.

Once the move is well underway, start to trail your stop but hold it outside of daily volatility ( if you do not understand standard deviation of price make it part of your forex education now), this means trailing right back - when the move turns, you are going to give back some profit, that's ok. If you caught just 60% of every major trending move you would be very rich! If it's a big move you will have plenty in the bank and you can't predict where prices go so don't try.

Simple?

Yes the above is very simple and it works. Simple forex trading systems work best, as they are robust and they always have. Complexity has no correlation with forex profits so don't confuse the two and try and be to clever.

If you try the above and you are patient, you will be forex trend following the right way, catch all the big trending moves and make big forex profits.

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