Advantage of Trend-Following System
Hi Traders
Hope that you getting final preparing for the next holidays...by the way don't forget to increase your trading knowledge before the and of this year...
Trend following systems in forex trading work much like the old rule of physics: A body in motion tends to remain in motion until acted upon by an outside force. When applied to currency, this is also thought to be true. If price is going up, it tends to continue going up, and profits can be made by investing on this trend. The trend can be upward, or it can be downward, and sometimes there's no obvious trend, but the principle remains the same. If you can see the trend then you can invest with the belief that it will continue.
The forex market lends itself very well to technical analysis. Since a country is such a big and complex entity, it is difficult to put an intrinsic value on it. Yet there are a large number of elements, both fundamental and technical, that can be used to establish trends. They include the GDP, CPI, prime interest rates, export and import figures, and even the unemployment level. All of these can be translated to charts showing the historical data going back decades. When they are charted, trends can be seen rather easily. When an investor becomes skilled in reading these charts and interpreting the trends, he will be able to use this information to guide his currency trading strategy.
Trend following is not always that simple. Indeed, it is quite a complex method of analysis. It can reveal historical turning points or levels where the trend tends to change direction. This can lead to investments known as "bucking the trend" trades. Although highly speculative in nature, they also present some tremendous profit potential. In essence, you are going to be betting that the trend is going to change direction while the majority of investors are betting it is going to continue.
Regardless if you are planning on bucking trends, or merely investing in the hope they continue in the same direction, understanding and identifying them is going to be the key element to successful investing strategy. This is one of the things that makes forex trading so appealing to the statistical minded and computer orientated investor of today. The facts are all out there, and the ability to gather and organize them has never been better. In the past, it was necessary to seek advice, and usually you had to pay dearly for it. While there are still plenty of financial advisors willing to give you their interpretations of trends, you are able today to do that pretty much for yourself.
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Happy Holidays
