The new traders always trade with the market trend. They blindly follow the statements of the professional traders. Some of you might know the key reason for which you should follow the market trend. Most of the time the market tends to favor the long term trend. So, if you trade against the major trend, chances are high you will lose money. But why do the rookie traders in Hong Kong lose money even after trading the major trend? Nothing is absolutely in the Forex market. The long term market trend often gets changed based on high impact news. So, if you fail to predict the trend reversal, you will lose money.
In this article, we will learn some amazing technique which will protect your trading capital from the major reversal of a trend.
Use a simple trend line
The new traders always use trend line trading strategy to ride the market trend. They never think the trend line might get invalid for some global cause. So, how do find such situations in the market? Let’s consider a bullish trend line in the daily time frame. A daily closing of the candle below the trend line support will clearly suggest the long term trend is near its end. After a clear break of the critical trend line support level, if the bears start to dominate the market, you need to consider it as a trend reversal signal. So, you should never execute any long trade even though the previous trend was bullish.
Analyzing the fundamental data
Assessing the high impact news is one of the most ways to assess the strength of the market trend. Being a trend trader, you must use Saxo Forex trading account since you get free access to robust trading platform SaxoTraderPro. The platform will give you the latest news update and if for any reason, if see a break of the major trend line, analyze the fundamental variables. High impact news like an FOMC statement, interest rate change, etc. can easily change the long term market trend without any prior notice. So, if you learn the proper way to analyze the fundamental variables, you can easily make a profit at any market condition.
Learn the major chart pattern
A chart pattern trading strategy allows you to find the trend reversal with an extreme level of precision. For instance, if you spot any head and shoulder chart pattern, a clear break of the neckline suggests bearish reversal. In such a case, you should be looking for a selling opportunity only. Learning the major chart pattern might seem a little complex at the initial stage but if you use the Saxo demo account you can easily learn the details of this market. Start with the most popular chart and slowly learn the other details of this strategy.
Using the price action signal
Understanding the Japanese candlestick pattern is a great achievement for retail traders. You can easily use the different formations of the Japanese candlestick pattern to analyze the trend reversal in this market. Instead of dealing with the multiple candlestick formations, focus on a single candlestick pattern. For instance, you can easily use the bullish and bearish pin bar to spot the major reversal in the market. At times you might get confused but this is absolutely normal. Take a short break and start trading the market with a fresh mindset.
Saving yourself form the major reversal is really easy. You don’t have to learn rocket science to save yourself from the major trend reversal. Follow the tips of this article and you will see a dramatic improvement in your win rate. At times, improvise your trading strategy based on the market sentiment. But assessing the sentiment of the market is a very challenging task. Unless you gain enough experience, you won’t understand the sentiment of the market. So, keep trading with managed risk to gain experience to become a better trader.