“The Forex can make your wildest dreams come true…BUT it is not a get rich quick scheme...

it requires work, study, continuous education, discipline and perseverance”. ProAct Traders LLC

We’ll assume you know what the Forex is and some basics about it.  If you don’t, then here is a link to get that info first   CLICK HERE.

The trend

You’ve probably heard the following motto: "the trend is your friend". Finding the trend will help you become aware of the overall market direction.  The Big Boys have no problem finding the trend because they use the 240 min and higher charts.  These larger charts are ideally suited for identifying the longer-term trend. The Big Boys can take multiple positions in the direction of the trend with larger stops (or no stops) and wait for the market to eventually make that move.  Our problem is we can’t trade these bigger time frames because we don’t have all the money in the world, have to use smaller stops and can’t stay in a potentially negative position for several days waiting for the market to finally do what the larger time frames are trying to tell us.   But the Big Boys are the ones who make these candles and are using their charts to determine the trend direction.  SO….we MUST find and use the same trend that the Big Boys are using.

How do you do that?  Regardless of what brand of charts you are using you need to always determine the trend of the Big Boys.  You change your chart to a 240 minute (sometimes a day) chart and plot the trend.

Step 1: Here we have a 240 minute chart.  We can see immediately that we have come off a high from the up trend and are now showing a small pullback (the red candles at the far right). 

So what are the Big Boys thinking?

Remember that 95% of the trading in the Forex is SPECULATIVE so the Big Boys are only thinking about one thing; where is the most profit and where is the least risk to get it?

Of all the possibilities for the Big Boys the MOST profit safely is going long (buying) after the Pullback* is done and they have already moved substantially in that direction to achieve it.  Yes there are still lots of Bulls in this market (the big boys who want to still go up) but the Bears (those going short) have wrested control of the market away from the bulls (at least temporarily) so the Bears are now in control.  You can see that by the bright red color of the candles.  These are Bear candles.  The bears are then doing a “counter trend” move.

* a pull back is ANY counter move that does NOT change the overall trend direction.  A breakout is a pullback that DOES change the trend direction.

So we’ll trend this UP! 

VERY IMPORTANT:  DO NOT TRY AND FORM FIT THE TREND – you are not looking to include all the candles because if you do that then you will NEVER see a breakout of the trend.  In an up trend find these first 2 lows and then add the high.  It is just the opposite for a downtrend.

in the above example it is easy to spot, but note this one:

See if you do not do it correctly then you will never spot the breakouts and in the above example If you included all the candles you would still be looking to sell as opposed to actually seeing the trend breakout from a sell to a buy.

Once you have found the overall trend, you move that trend down to the time horizon in which you wish to trade – typically the 10,15, and the  60 minute chart for our level of trading – intra-day trading.  Once you know the big boys trend, you can buy on the dips during rising trends, and sell the rallies during downward trends.

NEVER TRADE AGAINST THE TREND OF TODAY!

Step 2: If we are going to actively trade this market we would ONLY BE INTERESTED in the next two hours so we want to know: “What is the trend of the day”?  So we’ll change the 240 chart to a 1 hour (60 minute chart) (by the way, the 60 minute is the entry chart for the Big Boys).  If you are using good charts (not free ones) the trend information that you placed on the 240 chart will transfer down to the 60 minute chart.

So we’ll move to the 60 minute chart to see what it looks like from this vantage point. It looks like this:

Since every candle represents a one hour time frame we can see that for actually about 2 days the TREND OF THE DAY (the channel drawn above) had matched the OVERALL DOMINENT TREND.  This is why we call it “your friend”.  When the 60 and the 240 are trending the same way then your only trading opportunities that you will look for are opportunities to trade with the 2 trends in harmony (both are up).  In other words, in the example shown, we are looking for ONLY buying opportunities. 

You can easily see that trading OPPOSITE the DOMINANT TREND and the TREND OF THE DAY had very little opportunity and most likely would have resulted in losses.  This is because the Big Boys only want to trade the higher statistical probability (the buy) and let the scalpers have any sells.  So if the market is moving DOWN in an uptrend – WAIT until the market turns back UP to trade.

THE WAIT TRADE: 

Not one person in the history of trading has ever lost one dime trading the WAIT TRADE.  It is the hardest trade to master – staying OUT OF THE MARKET until the reaction has occurred and then taking the trade when it sets up, proves itself and comes to you.

Here is what our trend looks like on a chart we can trade – the 10-15 minute chart.

Once you have the Trend figured out and you are WILLING TO WAIT FOR THE TRADE TO COME TO YOU.  You now need to know where this movement has the potential to move.  Should it break north the next stop would be back to the top. This would create a DOUBLE TOP and is common in the Forex Market (as are triple tops).

This clearly shows you why the “trend is your friend”.

Here are what they look like when they ARE opposite.

240 Minute chart – UP TREND

60 minute chart – DOWN TREND

15 minute chart – TREND IS DOWN

Trading against the trend is enticing as you can see in the above 15 minute chart – but it is also expensive since it is against the trend and will produce more losses for novice traders.  It takes a lot of experience (years) to effectively trade against the trend.  You can see here however, a snapshot of a great up move (shown in the red box above and blown up below),