Post of the Day: Trend Trading Strategy

[B]Student’s Question:[/B]

When a currency pair is in a trend, either up or down, what is a strategy that a trader could use? Thanks

[B]Power Course Instructor’s Response:[/B]

A very straightforward trading plan in an uptrend would be to buy at support or buy a breakout above resistance…see the chart below for a visual.

Keep in mind that when a currency pair is in an uptrend, the higher probability trades will be in the direction of that bullish trend.

With that in mind, a trader could wait for a pullback to the support line and, provided that a candle does not close below that support line, a long position (buy) can be taken with a stop below the support line.

Should price action break above resistance and a candle close above that resistance line, then a long position can be taken at that point. The conservative stop would go below support while a more aggressive stop could be placed below the lowest level of price action running along the resistance line.

Also on the chart below, notice how MACD and the RSI indicators can provide insight as to timing an entry into the direction of the trend.

In a downtrend the process would be reversed. We would short at resistance and short a break below support.