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Using the Daily Trend to Enter a Trade

Using the Daily Trend to Enter a Trade

Richard Krivo, Trading Instructor

Instructor's Response:

Yes...

A trader would consult the Daily chart to determine the overall direction that the pair is moving. Then,choosing from all the available currency pairs, the trader would select the one with the strongest trend as that would provide the greatest potential for a successful trade.

Note the difference on the Daily chart of the GBPUSD and the Daily chart of the EURAUD below.  A trader can readily see which one presents the more viable trading opportunity...the EURAUD.

chart 1 27 10

 

chart 1 27 10 a

Looking at the Daily chart of the EURAUD pair, we can see this pair is in a solid and unquestionable downtrend since mid-March of 2009. With this information, we know that we only want to look for selling opportunities on this pair. Contrast this pair with the GBPUSD which has been trading relatively flat by comparison.

After using the Daily chart to decide the direction we want to trade the pair, we then would consult a 4 hour and a 1 hour chart to "fine tune" our entry in that direction.

Here is a link that explains this concept, Multiple Time Frame Analysis, in a bit more detail...

http://forexforums.dailyfx.com/dailyfx-course-instructor-trading-tips/23989-post-day-4.html

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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