We have received this article called "Trend is your Friend" from Charlie B. from the United Kingdom. For some traders, saying "Trend is your friend" might sound like a cliché, but for many other traders, it represents a cornerstone of their strategy. In this article, Charlie shares with us a simple trend strategy using FIBO and EMA.
Trend is your friend
Ever since I first started out trading I have always heard people say "the trend is your friend" and for a while, I didn't think too much about it. I thought people were being sarcastic and that the phrase was too basic to be of any importance to trading profitably, but now I am a few years in my trading journey, I now realize how important it is.
Trading with the trend means trading with momentum and buying the higher lows or selling the lower highs. What this does is it gives you an even greater probability of entering a winning trades, because you are going with the flow and not trying to fight it. Think about it… it is much easier to run downhill instead of uphill.
In theory, trading with the trend sounds very simple but I guarantee that a lot of new traders forget this as soon as they start trading with real funds. One of the simplest trading strategies I use is to buy the lows of 4hr trends and use the trendline tool, Fibonacci Retracement and 50 EMA (Exponential Moving Average) to do this.
A good example of how simple and effective this style of trading can be, I am using the EURAUD Forex currency pair as an example.
Once the bearish trendline was broken to the upside and price crossed through the 4hr 50 EMA, I was looking for entries for long positions.
My first entry was on the next higher low (buying the lows) when the price came back down to the 0.5 Fibonacci Retracement level and the 4hr 50 EMA. Price then went on to make a new higher high and this again confirms the trend is bullish.
My second entry was just as simple. Once the price came back down, I used the trendline tool to predict where the price might bounce and make a new higher low. The 4hr 50 EMA again acted as dynamic support and a long entry would have been good again.
So there we have it, the simplest trades are often the best trades. Find the trend for the timeframe you want to trade and then go with the flow.