Professional Forex traders love to trade with the major trend line. They never take the trades against the major trend as it significantly increases the risk. By executing new trades along with the trend, you can easily reduce the stress and win more trades. Sadly, novice traders don’t realize the importance of trend trading strategies. They try to take the trades at the top and bottom and eventually lose money. By the time they realize the importance of trend trading strategy, most of them lose their investment.
To trade with the major trend, you need to follow some critical steps. Today, we are going to give some professional tips which will allow you to take trades along with the key trend line.
Trade the higher time frame
People don’t understand the importance of trend trading strategy. They simply look for the trend line in the lower time frame and loses a big portion of their capital. But if you evaluate the trade signals in a higher time frame, you will get better results. That’s why professional traders always draw the trend line in the higher time frame. It gives them better profit taking the opportunity and let them earn more money. Though higher time frame trading is a bit boring, it can easily protect your capital from false signals.
Use the price action signals
Setting up the limit orders at the trend line is not a professional way to trade the market. The elite traders always use the price action confirmation signals to take their trades. If you want to protect your trading capital, you must learn about the complex price action trading strategy. Study the single candlestick patterns first. Once you are comfortable with the single candlestick pattern, you can learn about the complex candlestick pattern. By using the price action signals, you will be able to execute the trades with tight stops. Most importantly, you will feel more comfortable with your trade execution process.
Avoid the news hours
If you see a formation of a reliable candlestick pattern right at the trend line, you need to check the news. Never think the trend in the market will not get changed. High impact news has the potential to alter the trend within a second. Avoid taking the trades in the trend line during the key news release as these are the prime time when we experience major changes in the trend. Keep yourself updated with the latest market news so that you don’t have to lose money due to the sudden change in the trend. Learn about the impact of different news by using the free resources available in the reputed Forex broker Australia. Once you start taking the trades based on different trading session, your execution process will be improved to a great extent.
The risk to reward ratio
Just because you are trading with the trend line doesn’t mean you will forget about the risk to reward ratio. The minimum risk to reward ratio for each trade should be 1:3. If you trade with a 1:3 risk to reward ratio, you can easily lose 3 trades and still stay at the breakeven point. The novice traders often break this rule and trade with a 1:1 risk to reward ratio. Though it increases their win rate the system eventually fails to make them a profitable trader. So, learn about the importance of the risk to reward ratio so that you can win a big sum of money from the winners.
Keep on learning
Being a full-time trader, you should always keep on learning. Once you manage to keep yourself updated with the latest economic event, you will become more confident in taking the trades at the critical trend line. This will improve your trade execution skills and let you win more trades. Remember, without having a strong knowledge about this market, you can’t embrace the losing trades. Try to read 30 minutes per day about this industry so that you can make wise decisions.