Going with the Trend
Trend trading– As far as “tricks” in trading go, trading by following trends has to be the oldest one in the book. Following the trend is THE go-to advice experienced traders will give to anyone wanting to start trading.
Although it is good sense to do so, some traders still get confused about the way it should actually be applied. In this article we’ll go over what trading with the trend is, and how to spot trends easily.
What does Trading with the Trend mean?
Trading with the trend means exactly what you think it means: it’s spotting a trend (a long term direction in the market) and following it.
Basically you want to spot whether the market is going up or down, and place your entries according to that direction.
The general idea is that usually long term trends tend to last… well, a long time. Therefore if you were to jump into long trends at the start, you could potentially ride them until the end and make a boatload of money.
It also means you can add to your position gradually every step of the way. This obviously depends on the type of strategy you’re using, but it should be your goal to always place your trades in favor of the dominant trend in order to put the probability of winning the trade in your favour.
How to Spot the Trend?
Obviously the first issue for new traders is to actually spot the current trend. Markets can go 3 different ways: up, down or sideways. Even though there are only 3 solutions, things can get confusing so let’s define how we look for trends once and for all.
First step is to open your charts, and zoom out. You don’t want to be seeing big candles or bars. Zoom out until you can see quite a bit of data on your charts.
Now sit back, and look: where is the market heading? Think like a 5 year old. If you were to ask to a 5 year old, “Where is the market going?”, what would he say? If you have a 5 year old, ask them! Its quite easy to spot when you don’t over think it.
How to Trade the Trends in Binary Options
Trading and following the trends is probably the single best way to make money in the markets. It has always been the strategy that big investors use, and this since the very early days of market trading.
Trend trading in the traditional markets (forex, stocks, etc.) is fairly straight forward. All you need to do is spot the current trend, build a strategy that allows you to jump in it at profitable points, and apply your rules the best way you can.
In binary trading though, it can become a bit more difficult. In this article we’ll see why it’s more difficult to trade the trends in binary options.
Trend Trading in Binary Options
The difficult part of trading the trends with binary options is that you’re locked into a trade for a certain amount of time, with what seems to be no power.
Let’s say you were to place a long term trade in the regular forex market, following the current up trend. It would be easy for you to regularly check up on your trade and adjust your risk. You could for instance move your stop loss up, close some part of your trade to limit your risk, or even just close the trade if you feel like you’ve taken all you could get.
In binary trading, you simply can’t do that, hedging your trade if the trend goes against you is the a good way to minimize risk, You can also manage your trade for a double profit setup, but that is more suited to a non trending market situation. Once your trade has been placed, you have to wait for the expiry to kick in, however, with some platforms you have the ability to sell off your position before your expiry, at a small loss if the trade goes against you or for a profit if the trade is going your way, which is essentially the same stop loss system regular forex traders use without all the complications.
You definitely can make money following the trend in binary, you just have to adapt to the market conditions and manage your trades accordingly.
Finding the current trend is one thing, figuring out which expiry you should take is another. Try to think in absolutes: where is the market likely to reverse or slow down, and how fast is the market moving? (volatility) If the market is moving in quick successions of high numbers of pips, you might be better off placing a short term expiry on your binary trade, If the market is moving very little and is not showing many signs of being volatile then its wiser to extent your expiry times.
There are a plethora of ways to use the trend in order to trade binary options profitably. It is one of the simplest and most reliable chart patterns and can and should be integrated in all strategies while trading. If you have any questions about using the trend to trade binary options or would like to share your story of trend trading please do so in the comments section.