Forex Trend Following - Why So Many Fail When Using This Simple Yet Effective Trading Strategy

FinanceStocks, Bond & Forex

  • Author Daniel Saeper
  • Published September 20, 2010
  • Word count 394

Trend following, a method used by thousands of online Forex traders, is talked about on forums & message boards as one of the most effective yet most basic strategies for trading Forex. If this is true, if trend following really is a newbie strategy that can bring in hundreds of pips per week, why do many traders fail when using this strategy? The answer is more simple than you could ever imagine.

In Forex there's more strategies available than anyone could possibly realize. From Fibonacci trading to automated signal services to trend following, the number of strategies available is staggering. However, while each of these strategies may be very effective, there's one important key to success when using any one of them, including trend following. The single most important thing you can do before using a trading strategy is gain experience!

Many traders fail when trading Forex based on trend following because they try it once or twice, see that it works & say to themselves "I can do this!" without realizing all the other factors involved. This usually results in little to no profits and, worse yet, the loss of an initial investment.

To avoid this and, more importantly, to use trend following effectively, you can follow these 3 simple steps before starting to trade Forex:

1.) Read online Forex forums, blogs, or informative news articles to learn trend following strategies better. Knowing when the trend is going to continue or reverse itself is key.

2.) Setup a demo account and, using the trend following knowledge you gained from reading about the strategy, sit & look at the charts for a while. Make note of how certain trends move over the long & short term.

3.) Using your demo account, trade using your strategy for at least one full week in real time market conditions to make sure your strategy really works, before making a deposit into a real account.

Using these 3 strategies, your chances of being successful trading based on trends increase greatly. Whether you've traded stocks for decades, are using the best Forex signal service available or have purchased an ebook explaining ever possible aspect of the market, there truly is no substitute for experience in real time market conditions.

Trend following can be a very successful strategy but only when you gather the right information, some chart reading experience and, most importantly, experience using it under realistic conditions.

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