Last Updated on Feb 7, 2022 by James W
Trading the trends should be the ultimate objective of retail traders. Different technical analyses provide traders numerous signals to trade with the trend. Apart from these strategies, traders can rely on other advanced techniques to ride the major trend in the CFD market.
To make a profit by using a trend trading strategy requires conservative speculation. Try to develop a higher timeframe-based trading strategy as the risk factors are very low. Always use the price action confirmation signal before taking any trade. If you think you need more confirmation before entering a trend, feel free to incorporate a trend following method. Let’s learn some amazing techniques you can use to trade with the major trend like a pro trader.
Adjusting the Major Trend lines
This is the biggest challenge in a trader’s life. This idea is particularly tricky because of the high volatility of the market. The automatic trading system makes the overall environment messy and drives it to behave improperly. It makes the market more unintelligible. So, always use the manual method while drawing the trend lines in the chart.
At their core, all trends are just a combination of lower lows, lower highs, higher highs, and higher lows. In a chart, trends only appear after depicting trend lines. That’s where the name came from. Not only that, the key to pursue a trend is to ensure that you know all the details of the market to enable you draw an accurate trend line when the trend debunks.
Let’s learn some basic rules which we must follow while using the trend trading strategy.
- First: To draw the bullish trend line connect a low with a higher low. For the bearish trend line, you need to connect a high with lower high. But make sure you have three connecting points while drawing the trend line.
- Second: If the support becomes resistant, the trader needs to prepare themselves for the reversal. Novice traders can use the CFD demo account and learn more about the broken support and resistance level in the trend trading strategy.
- Third: It is better to look for the price action signal at the major trend line. The trend line must be drawn in the hourly or daily chart.
Following a Trend Deploying a Channel
Channels are great when it comes to having a proper visualization of the movement. However, investors fail most time to perceive the proper channel or the proper price movement that exists in the real currency market.
However, there come times when the market gets a little vulnerable, and reading it with some methods gets possible in that time. That’s where channeling fits in.
After learning to draw the channel, the trader need to trade at the channel’s support and resistance. However, the support and resistance levels are not an absolute zone to take the trades. In short, the channel is not going to provide profitable signals 100% of the time. So, never trade with insane risk just because you know the perfect way to deal with the trend line and channel.
The key idea of this channel trading system is very simple and closely related to the functions of Bollinger bands. A Bollinger Band is a great indicator that provides dynamic support and resistance to the trading instruments. According to statistics, the price remains about 95% of the time between the Bollinger Bands. It is a compelling and stunning case to attempt to do something when the movement differs from what it indicates.
While using the Bollinger bands, retail traders should be aware of the reversal factor. Though the band can provide accurate support and resistance, no one knows when the trend will change. That’s why it is better to use the Bollinger band along with the simple trend line tools. If possible, merge the price action strategy with this technique to improve the efficiency of your system.