Hey folks! How you all doing? the 7th month of 2012, or the 30th week of 2012 will come to an end soon and how’s your performance? I hope it is getting better! If you still losing, that okay as long as you don’t lose the whole farm! …lol… But seriously, we must take trading as a marathon, as a business if you will, because only then we will succeed. Our performance is not measured on a single trade and even when we lose the opportunity, there will always be another day. So it is important to persevere in this endeavor.
Anyway, I want to share with you guys, what I am sure most of us have heard again and again. Trend. We often heard traders say “follow the trend”, “the trend is your friend”, and many more variations of the saying. So what is a trend?
Well, let me simply say, what is a trend for me might not be a trend for you. Yes, you heard it right! Every single trader has different definition of trend and even with that definition, there might be a different trend in a different time frame.
Let me illustrate with 3 example charts of EUR/GBP below:
- EUR/GBP H1 With 21 & 55 EMA crossover as the trend identifier.
Some traders use moving averages (MA) crossover to identify trend. There are numerous possible combinations of crossover like simple MA, exponential with closing, typical price and you name it, there are just too many. Here is a sample of Double MA (there are also traders who use triple crossover). The green circle identifies the up trend, defined as 21 EMA crossed above 55 EMA. What ever the number used to define the crossover is a personal preference.
- EUR/GBP H4 With 21 & 55 EMA crossover as the trend identifier.
In this example below, the 4 hour chart is still indicating down trend. So you see, different trend in different time frame even using the same definition.
- EUR/GBP H1 With Trendline and Gann Fan to identify trend
For traders who use trendline to identify trend or some geometric traders who use Gann Fan, an up trend is when the down trend line is broken (small green circle) and when price is above the 45 degree angle (big green circle)
The above examples are just some of the many defintions there are. So we can see here that different traders define trend differently. If you ask me which is the best definition, I would say the one that resonates well with you. We all have different personality and psychological make-up and what works for one trader might be a disaster for another.
That is why we keep changing from system to system; not to waste money…lol…but to find the one that resonates best with us. Now, that does not mean that we going to have no losses! …lol… It simple means we will have no psychological conflict with the system. Seek and we will find the one we are in harmony with.
May ALLAH (GOD in English, ELOHIM in Hebrew), grants us success!