Forex trend following is one of the best ways to make money in financial markets. It's simply based on the fact that markets trend long term and by locking into and holding these trends you can make a lot of money. Here we will look at trend following via price action in more detail.

While people claim that markets have changed over the years they haven't. Traders still decide the price of any currency and they will always be influenced by the emotions of hope, greed and fear. This creates trends which can be followed for profit, this has always been so and always will be. You can take a look at a chart of any currency pair to see this is true.

One of the greatest traders who defined trend following as we know it today and also, adopted a systematic approach to trading trends was Richard Donchian.

Richard Donchian

Richard Donchian used a specific rule based trading approach which is referred to as trend following and is based on the fact that financial markets make long term sustained moves (up or down) and these can be traded for profit. It doesn't matter what the market is - Donchian believed it could be traded in the same way and he developed a set of rules to do this. His classic trading method of trading known as 4 Week Rule system still works today over 40 years. Donchian is known as the grandfather of modern trend following and has influenced many of the great traders including such legends as Richard Dennis.

Richard Dennis and the Turtles

Richard Dennis was one of the most famous traders of time and decided to prove that anyone could trend follow and make money, with a simple rule based system. He taught a group of traders who had never traded before to use a simple breakout system to lock into and hold long term trends. The system made hundreds of millions of dollars in the 1980s and the rules still work today.

Pro Traders Trend Follow Novices Predict

The professional Forex trader, will use trend following strategies but the novice trader prefers predictive theories and short term trading. With the rise of the internet, marketers latch onto the huge number of new traders, who want to make huge gains, with low draw down and they sell the idea that markets can be predicted in advance ( they can't) and you can make money scalping or day trading which leads to these traders, taking low odds trades and getting wiped out.

There has been an upsurge in Forex robots which are supposed to be able to predict the future and a number of dead guru's work is also sold online; with the most famous being - Gann and Elliot and Fibonacci. Of course prediction and science doesn't work and neither does trading very sort term time frames but the public want instant gratification, low risk and high rewards. These novice traders, lose money and join the 95% of traders who lose money. However in the minority 5% of traders who make money, there are a huge number of trend followers.

The Advantages of Trend Following Currencies Via Price Action

Here the advantages of trend following currency pairs and why it's the best way to make big gains trading FX markets

It Works in ALL Markets

Trend following is not restricted to any single market, it will work trading stocks, commodities or currencies. Price is the one thing that all free markets have in common and traders make the price in all of them. In conclusion these traders make the price and create trends which can be traded for profit, with simple rule based systems based upon price action confirmation.

Mass Psychology Never Changes and Creates Trends

In terms of trend following, people will always create trends and greed and fear will push them to far to the upside or downside and if you take a look at currencies, you will see that many of the big trends can last for weeks, months or even years and by trading these trends, you can make huge gains.

A Disciplined Approach to Trading

Trend following uses rules which are simply based upon, waiting for price action to confirm a trend and then following it for as long as possible. Anyone can learn the rules to needed to make money because they can be very simple. In terms of trading long term trends, the frequency of winning trades is irrelevant – its the size of the winning trades that counts. Trend followers very often lose 70% of the there trades but still make huge gains, because there winners are so big and their losers so small.

Big Gains in Volatile Periods

Trend following does well in all periods boom bust recession it makes no difference trend following can still make money. In fact the best periods tend to be ones which feature a crisis event which leads to high volatility and panic.

Trend Following Is Time Efficient

Trend followers are patient and their trading strategies will not trade that often. You don't have to look at a computer screen all day, as marketing timing is not critical and missing a few pips is not going to impact profitability to much. Trend following can be done in under an hour a day and the rewards of trading price action via trends is huge.

Final Words

Anyone can learn to be a trend follower in currencies and the principles are easy to understand and a look at any currency chart, in any time period will show you how lucrative the strategy is – so if you want to make money trading currencies, then discover Forex trend following.