Forex traders devise strategies to avoid losses and consistently rake in profits in the market. As a result of the dynamic nature of the market, trading forex can be quite risky, particularly when the global economy is in turmoil. The effect of the COVID-19 pandemic has dealt a very devastating blow to the world economy, which will have an impact on the Foreign Exchange (Forex) market. With the year 2020 still looking like a sick man yet to be discharged from the hospital, we have carefully developed the Best Trend Strategies to adopt in 2020.
Trend following strategies is one of the strategies applied by traders to advance their chances of making profits. In Forex trading, Trend Following is a trading system that, tries to capture market trends through all markets, with the aid of convenient risk management.
Best Trend Strategies To Follow
The Best Trend Strategies in Forex to follow has been viewed as overtime as some of the best successful trading strategies for a trader to apply.
To the beginner out there, they are the top strategies to follow as they are usually simple to implement. Regular application of the trend following strategies assists one in understanding the workings of the market as well as making good profits. Professionals, like the beginners, also depend on trends, with some claiming traders can profit regularly from it if their knowledge is top-notch.
Though, not an easy strategy, the phrase he trend is your friend” is testimony that it is always available for anyone to use. That can be further elaborated to; “The trend is your friend until the end when it bends.” A very true statement. If you are a trend trader then also read our best indicators for intraday article to see which forex tools are best for that.
In this post, we will expound the Best Trend Strategies to adopt in 2020.
Features of Good Trend Following Trading Strategies
A veritable Trend following strategy should possess certain interesting features to attract every trader. They comprise:
• Ability to unmistakably identify an emerging trend- there is nothing as more important as spotting a trend. It should be able to do this precisely.
• Ability to accurately identify entry and exit points- any good trend following strategy should possess a point of entry and exit. If a strategy doesn’t have these feature, it cannot be used a strategy.
• Capability to spot a changing trend- a good strategy should be able to capture the moment a trend is changing so that a trader can respond accordingly; otherwise, he would be banking on a failing system.
• Fundamental and/or Technical analysis information: given that the Forex market is hugely dynamic, s good trend following strategy should have input from technical and fundamental analysis for a balanced strategy.
• Ease of use- a great strategy should be quite easy to apply, learn and repeat. Too many variables and steps in a strategy can cause problems for the trader. Easy is it!
Best Trend Strategies To follow and adopt in 2020
1. Moving averages
Moving averages are one of the Best Trend Following Strategies to adopt in 2020 and are a tremendous means of identifying the underlying trend behind a tool and can be seen on most charts. The following chart shows an example of Moving averages.
There exist lots of diverse moving averages; however, several trend traders opt for a slow moving average, SMA. They are quite helpful in focusing on the real price as well as the direction of a trend and can assist traders in avoiding misleading temporary changes in price.
It can be applied in a trend trading strategy by going long when the current price slides below the moving average and then go short when the current price encounters the moving average or goes above it.
A vital point to note is that moving averages cannot show if a trend will end or not. Moving averages only show you previous movements. Thus, you cannot exclusively depend on them.
2. Bollinger bands
These are quite an effective indicator to use on the charts. This indicator assumes that market prices will bounce back just like an elastic band. They work by showing the lowest and highest points the price of an instrument attains. They applicable in downtrends, ranging and uptrend markets.
The most significant effect of Bollinger Bands is to measure volatility. When the bands are quite far away from the prevailing price, it can mean that the market is quite volatile. When they are pretty close to the prevailing price, it implies the opposite.
Several traders, mainly beginners, must be advised to stay away from any of those two.
Bollinger bands can be used as part of a trend trading strategy. With going long (buying) when the price meets the lower band and going short (selling) when the price reaches the upper band.
3. Bull and bear flags
The Bull and bear flags are also one of the Best 5 Trend Following Strategies to Adopt in 2020. They are made when you make use of a channel pattern above them.
The lower aspect of the movement signifies the flag pole. And the channel lines signify the flag itself. When they show up, they indicate that a trend was briefly interrupted.
When we have a bull flag, it means the market is rising. Conversely, in a bear flag, it means the market is on the downward spin.
Bull and bear flags could be incorporated into a trend trading strategy by entering the market and acquiring and riding a trend.
4. Relative strength index
Relative strength index, RSI for short, is an oscillator indicator is very popular as it has been in use since the 1970s.
While it is usually used for finding out if an instrument is underbought or overbought.
Whatever is over 70% is considered to be overbought, when lower than 30% is considered to be underbought. Usually, what happens is if the price of an instrument gets to overbought points, a trend will reverse, and prices will begin to dip.
On the other hand, when the price gets to underbought levels; it will begin to increase in price. In order to use this indicator correctly, it is best to work with daily or larger charts else you may receive too many signals to sell or buy.
RSI can also show when a trend is about to end. If a downtrend is about to appear. It can be shown when RSI declines while price does not. This can serve as a signal to go short (sell) before the downtrend begins.
As with all patterns and indicators in trading, one cannot solely depend on it. This is particularly factual if huge news is released and the price of the instrument soars up or takes a dive down.
5. Triangle patterns
Numerous different kinds of triangle patterns and some traders refer to them as wedge patterns. Classically, what happens with a triangle pattern is the price gets tighter and tighter. And then ultimately breaks out into a downtrend or uptrend. Some people prefer to use the supertrend indicator mt4 also with it.
In order to make use of triangles in a trend trading strategy, a trader ought to sell or buy immediately the length of the triangle is reached.
For instance, if the triangle length is 50 pips, target to sell or buy when the price gets to 50 pips just after breaking.
Conclusion On Best Trend Strategies
These are the Best Trend Following Strategies to adopt in 2020 any trader can confidently use. They can be applied after carefully practicing with them. They have been carefully selected to give any trader good returns on investment.
However, they are not to be applied solitarily, other trading tools and trend indicator mt4 should be factored be deciding on trading positions.
Our best forex indicator website has other trading tools and indicators to help. It could turn a trader’s fortunes in the market. So check it out through this link and help yourself to make better trading decisions.