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Every trader in the world has heard this expression tens or even hundreds of times. And it doesn’t matter whether you are a novice or a sophisticated one. Everybody knows it and almost nobody uses it. People always complicate things. Have you ever noticed that? In every area of your life when you need a solution for the problem you are always trying to find the most difficult one. We all adore obstacles, the harder they are the better. Listen to the people who achieved success in their lives and you will notice that. Some of them became financially independent, some struggled from a horrible disease and then recovered from it, some fought for their lives but their stories are just the same. They show their previous life as miserable and disgusting. Then they’ve made a titanic effort and got out of it. Now they look admirable, other people love and appreciate them. “I used to be 400 pounds and look at me now. I was broke and didn’t have money not even to pay my bills but also to buy some simple food. I was a virgin till 32 years old and now every woman wants me…” This is a typical story; we often exaggerate them because it caresses our egos. That is why we all like difficulties, it’s a complex from our childhoods – we want to be heroes.
If you look at the screen of a typical amateur trader you will find 5 to 10 different indicators or oscillators, tens of lines on the charts so you can’t even see the actual bars or candlesticks. Professional traders have from 2 to 4, maybe 5 things which help them to treat the current situation on the market. I beg you on my knees: don’t make the Forex harder than it is. If you want to lose weight, drink water and eat fruits and vegetables mostly, do some cardio. If you want to learn a foreign language – learn the most frequently used words and grammar rules – you will have terrific results. If you want to succeed on Stock or Currency market – find very simple and logical things which work and don’t stuff your head with unnecessary information.
So here is a one billion dollar question. How to understand that there is a trend on the market right now? The definition says that trend is the gradual increasing or decreasing of the maximums and minimums. Can you profit from this statement? Most of us can’t because it’s not useful. So here’s a simple method. What if we draw 3 or 4 Exponential Moving Averages with periods 8, 24, 60 and 120 on H1 timeframe? Moving Averages show two immensely important things – the direction of the price movements and the value of a currency. When the price is near the MA with the period of 24, that shows the value of the currency for a day. When it is near the MA with the period of 120 we see the value for a week and so on. But the direction of the Moving Averages is even more important.
I’d like to offer to you my definition of trend. Place 4 MA’s on a chart and look at them on 4 biggest timeframes: H1, H4, D1 and W1. If they are collinear and all 16 lines look upwards that is a bullish trend and the only possible decision is to buy or not to do anything. If they look downwards that is a bearish trend and you can sell only or stay aside. Never play against the trend. It is the most unreasonable thing which one can make. If you see that on any of higher mentioned timeframes the MA’s are changing the direction and now they are not correlated, it is not trend anymore. Have some rest and do nothing until you see another trend.
As the saying says: “On bullish trends bulls make money; on bearish trends bears make money; in flats both lose”. Be patient, you don’t have to play all the time, wait for a great deal. Ask yourself: “Have I come here for money or emotions?” If you choose the second answer – you’d better run or you will lose your deposit. Amateurs want emotions, professional traders come for money. Everyone gets what he wants because the market is fair.