Trading With The Trend Strategy

8Trends6010913This article is intended to introduce you to the very profitable trading technique of trading with the trend with the intent of boosting your spread betting profitability. Basically if you can learn how to detect trends and trade with them then you will significantly increase your chances of attaining consistent profits from your spreading betting activities. If you perform this task by studying trading charts utilizing the higher time-frames of the daily upwards, then you will be trading in such a way that would be the equivalent of swimming with the tide. This is because you will enjoy the benefits of trading in the same direction as the current market forces.

 

Identifying Uptrends

You should commence this activity by detecting those daily trading charts that exhibit the strongest trends. The following diagram illustrates a well-developed uptrend.

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For instance, you should easily be able to detect if an underlying asset of a spread bet is in an uptrend as shown in the above diagram because it will be climbing in a rising price channel. In addition, you can also confirm that price is fluctuating between a lower trendline and an upper one and that it has generated a series of consecutive higher highs and higher lows. If you are not sure and cannot easily identifying these key features of an uptrend when studying the daily trading chart of a particular asset, then you should simply move onto the next one.

Once you have accomplished this objective of identifying up-trends, you will find that the best way to trade them is to buy on dips. Basically, this means that you wait and buy when price has bounced against the lower trendline. You should also place your stop-loss order beneath the lowest price that the underlying asset of your spread bet has achieved during its latest pullback.

 

Identifying Downtrends

You can also adopt the opposite strategy when you trade downtrends. The following diagram provides an excellent example.

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For instance, you should easily be able to detect if the underlying asset of a spread bet is in a downtrend as shown in the above diagram because it will be depreciating in value within a declining price channel that is contained within an upper trendline and a lower one. In addition, you should also be able to confirm that the pair has been achieving consecutive lower highs and lower lows. Again, if you are not sure and cannot easily identifying these key features of a downtrend when studying the daily trading chart of a particular asset, then you should leave it and move onto the next one.

Once you have accomplished this objective, you will find that the best way to trade downtrends is to buy on rallies. Basically, this means that you must wait and buy when price has bounced against the upper trendline. You should also place your stop-loss order above the highest price that the underlying asset of your spread bet has achieved during its latest rally.

The Benefits of Trend Trading

You will optimize your chances of attaining consistent spread betting profits if you trade with a trend because you will then enjoy a significant momentum that is moving in the same direction as your spread bet. You must appreciate that you can attain profits by trading against a daily trend but that you will experience more difficulty and your risks per spread bet will be much greater. As spread betting is an involved subject, you must always seek methods of reducing your risk exposure as one of your top priorities. Trading with the trend can help you achieve this task.

 

Multiple Time Frame Analysis

This is a trading method that is used to evaluate the trading performance of an asset by utilizing several different time frames.  The prime advantage of this technique is that you should be able to achieve deeper insights into which direction assets are likely to advance if you analyze them using a sequence of shorter time frames.

You will find that spread betters normally have a tendency to choose three time frames when utilizing this trading strategy and the exact ones that they select tend to be based on their trading styles. For example, a longer term trader usually selects the Weekly, Daily, and 4-hourly trading charts.  The prime objective is to identify the direction that an asset is most likely to travel using the longest time-frame and then utilize the shorter ones to detect the optimum opening positions for your new spread bets.

The main concept of this method of analysis is based on the theory that trends exist within trends. In addition, you must be aware that you could detect a downtrend on the daily chart but an uptrend on the hourly one for the same asset. Under such circumstances, you must appreciate that the longest time-frame always specifies the real trend.

As such, you should conclude that price is experiencing a retraction on the hourly chart before it resumes the dominant down direction that is prevalent on the daily chart. Consequently, your strategy would be to identify the best opening position for a new spread bet by detecting when this retraction begins to peter out and price commences to move in the direction of the major trend as identified on the chart using your largest time-frame selection.

As such, if you analyze trading charts using multiple time frames then you can obtain a better feel for identifying the optimum entry points in the direction of the current trend. For example, the following daily chart of the EUR/USD shows a strong uptrend.

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 The following four-hourly chart also supports a strong Uptrend.

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Remember that the prime objective of Multiple Time Frame Analysis is to utilize the lower time frame charts to help you select the optimum entry points for new spread bets. As such, if you now look at the hourly chart as shown in the next diagram, then you will notice that price has bounced against the lower trendline after dipping in value.

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If you can next confirm that this support line does hold then this would be an ideal stop to open a long spread bet.

 

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