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Candlesticks and Trading with the Trend

Candlesticks and Trading with the Trend

Richard Krivo, Trading Instructor

 Instructor’s Response:

 
That is correct.
 
While pips can be made by trading "counter trend", those pips will come at a higher risk. As traders, we do everything that we can to reduce our risk in trades. One of the key steps we can take to reduce risk is to only take trades in the direction of the Daily trend.
 
Note on the historical EURUSD chart that you posted, how short and choppy the bullish (countertrend) move after the hammer candle is and how much longer and smoother the bearish move (in the direction of the trend) after the doji is.  This is an excellent visual example of the impact on price action trading in the direction of the trend can have. 
 
chart 5 24 10

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

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