Exploring Forex Strategies With Trend Following

The Forex market, also referred to as the currency market, is a highly liquid market where foreign currencies are bought and sold on a daily basis. In fact, the Forex market is open 24 hours a day (except on weekends). If you have an interest in trading and investing in this market you are probably already interested in learning about the many different currency market trading strategies and how they can make you money.

One of the most popular and easy to follow Forex strategies is known as trend following. This very simple strategy makes use of a currency that is range bound, that is, it is consistently trading between two price points. This strategy has become one of the most popular Forex strategies because it is very easy to understand and follow. Basically, once you identify a currency that is range bound, you can enter a trade when the currency is either at the high point or low point of its range. It's as simple as that.

There are several ways you can determine whether a currency is range bound.  One very simple way is by looking at a currency's moving average on a chart.  If the moving average is inclining sharply, it is showing an increasing trend.  If the moving average is decreasing sharply, it is showing a decreasing trend.  If you see a moving average that is neither increasing or decreasing but appears to be flat, this is indicative of a currency that is not trending in either direction.

Another method you can use to determine a currency that is range bound is with a MACD histogram.  The MACD histogram allows you to add additional levels above zero and below zero.  This will reveal a currency that is range bound on your charting software.  It is very easy to see since there will usually be hardly any movement either above or below the histogram lines.

After you have spotted a trend, regardless of whether it's increasing or decreasing in a range, you can then closely monitor the currency to see when it's nearing a point where it will start trending in the opposite direction.  When you see that the currency is about to reverse direction, that means it's now a good time to enter a trade position.  You can then follow the trade until you see it's about to reverse course again.

Once you've entered a trade position, always monitor your trade very closely.  You don't want anything unexpected to catch you off guard.  Keep a close watch on the currency's technical indicators.  They can give you an indication of when the trade is about to run out and give you a clearly defined exit point.  

Although there are many different Forex strategies you can use, sometimes it makes sense to stick with the simple ones.  Trend following has become very popular because of its ease of use and it's easy to understand.