How to trade in a trending market
For trending markets, I’ve mentioned that you can trade trend continuation or breakout trades.
So let me share with you an example.
Let's talk about USD/CNH.
I’ll apply simple technical analysis with the statistical data that you’ve learned for this currency pair.
USD/CNH is a trending market.
It had a declining stage lower:
Then the market went into this range over here:
What's interesting is that this market is showing signs of bottoming out.
Entering the trade
Then you have this build-up formed over here:
If you see this pattern, from a technical analysis standpoint, this is actually bullish.
It’s a sign of strength.
Because buyers are willing to buy at these higher prices at resistance.
What we can do is to simply buy the breakout of the highs.
On top of it, I’ve shared the statistical data – USD/CNH is a trending market.
So this should give you the confidence to buy breakouts on this market since it has a valid
technical trading setup.
Exiting the trade
The next thing is how you can trail your stop loss.
Couple of ways you can trail your stop loss:
1. Use a 20-period moving average
You can trail your stop loss until price breaks and close below this 20MA over here:
2. Trail your stop-loss on the weekly timeframe
You would have entered here:
You can exit your trade when the price breaks and closes below the previous week’s low.
So those are a couple of ways you can trail your stop-loss.
It's nothing rocket science over here.
You’re just taking statistical data which shows that USD/CNH tends to trend over time.
And you overlay it with a simple technical analysis like buying breakouts after build-up forms at resistance.
Or maybe buying a pullback towards the 20MA.
It’s all just very simple technical analysis tools.
But when technical analysis is combined with statistical data – it’s powerful stuff.
The key thing I'm trying to share with you is this:
When you're trading markets that tend to trend, you want to be trading setups that are in the direction of the breakouts.
So that's a couple of examples over here, for trending markets.
With that said...
I wish you good luck and good trading, and I'll talk to you soon.