How To Determine Whether The Trend Is Strong?
You can compare a trend to a river. It is always easier to paddle in the direction of the river! Your speed of paddling can be assisted by the speed of the current. For if the current is real strong, you can make a fortune.
Trend is like a river. Rivers cannot be tamed at least not in the forex market. You see, forex markets are so huge that practically, it is impossible for a few big players to team up and manipulate the whole market. But it can be done in the stock market. This is what the big players do in the stock market. Considering the fact that more than $3 trillion get transacted in the forex markets daily around the world, it would be real hard for a few big players to pour this much capital just in order to manipulate it.
Now past observations have shown that a strong trend in the forex market has a strong tendency to pullback to a key moving average before resuming the trend.
What we need to do is to add a filter based on this exponential moving average (EMA) in order to be sure that this is no ordinary trend.
As we have said before, in a strong trend, our main focus will be the 10 day exponential moving average. Now, in case of strong uptrend, you should find the 10 day Exponential Moving Average (EMA) above the 20 day EMA and the 20 day EMA should be above the 50 day EMA. In other words, the three moving averages should appear like this on your daily chart; 10 Day EMAis above the 20 Day EMA which is above the 50 Day EMA. Now, when you find such a setup, it means that the probability that this uptrend is going strong and has big money backing it is strong. However, just in order to confirm that the uptrend is strong, you should confirm that the price action is above the 10 day EMA for at least the 10 last candles.
Plus the price action should be above the 10 day EMA for a period of at least 10 candles to confirm that this is a real strong uptrend.
In case of downtrend, reverse the order of the EMAs. The 100 day EMA should be above the 50 day EMA. The 50 day EMA should be above the 20 day EMA and the 20 day EMA should be above the 10 day EMA.
Once, you have the above conditions fulfilled, you have a strong trend confirmed. A strong trend means that big money in the market is moving this trend and this trend can continue for quite sometimes. Trading a strong trend can be highly profitable. So, once, you spot a strong trend, get ready to enter it. As said above, your entry should be based on the 10 day EMA. Good Luck!
Article Source: FxTradingStock.com
About the Author
Mr. Ahmad Hassam has done Masters from Harvard University. Discover this secret Forex Profit Multiplier 60 SECOND Forex Trading Method FREE. Download this FREE 82 page PDF highly profitable Candlestick Patterns Guide just now!
by: Ahmad Hassam
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Word Count: 477
Date: Thu, 14 Oct 2010
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