I usually do not think that any person who has been trading the currency markets for much more than a number of months will have failed to notice the phenomenal increase in market volatility.
With increased volatility, so we see that trends are likely to be of a lot shorter duration if a trend might be discovered at all.
Should you examine the GBP/USD as an example, prior towards the credit crisis it had been in an general up trend from March 2nd 2002 - till October 2007. Effectively more than 5 years.
In the event you had purchased on the 2nd of March 2002, 1 single standard lot (not allowing for the roll over charges) you could have cashed that in on Friday evening October 5th 2007 with a profit of over SIXTY 5 THOUSAND DOLLARS.
That's a profit of just a little beneath $1000 (per 1 single lot traded) each and every month for the duration of the trend.
Anyone that truly did this would have certainly no problem with agreeing the widespread and usually touted phrase - The Trend is your Friend.
Given that November 2007 and now, the identical pair has been in what can only be described as a full reversal.
In the past 16 months, the GBP/USD has dropped by more than 7,500 pips or, to place that in to perspective, for a single single regular lot (not allowing for the roll more than charges) you can have cashed that trade in for more than SEVENTY 5 THOUSAND DOLLARS.
That may be a profit of slightly over $4600 (per 1 single lot traded) each and every month for the duration of the trend.
Now I am not confident about you but for those levels of profit I'm willing to at the very least take into consideration the trend as a possible friend.
Naturally, many of us tend not to trade over such long periods of time but this does not mean that we can not follow a trend of sorts.
Inside every single most important trend you will discover smaller trends. These are intermediate trends and are greatest calculated from a 1 day and 4 hour chart.
Particularly when the markets are volatile, searching for out the intermediate trend is usually a rather useful strategy as the longer term trend might be difficult to effectively calculate.
You will find numerous methods to calculate the intermediate trend, but failing all else, the time honoured and trusted process is simply to draw a trend line making use of a minimum of 3 swing points on the four hour chart.
Possibly the time is suitable to introduce a new trading maxim:
The trend may possibly well be your friend, but when your buddy is just not obtainable the intermediate trend is your best buddy.
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