Trend trading is the most profitable trading system in the forex industry. Most of the professional traders who are successfully trading the forex industry and making the consistent profit out of it are trend traders. There are two types of the trend in the market, uptrend and the down trend. Since it’s an advance trend trading strategy we will further divide the trend into two parts.
The primary trend reflects the long-term movement of the price and the secondary trend line reflects shorter price movement inside the long term prevailing trend. Let’s see an example primary and secondary trend trading:
Figure: Advanced strategy for trading the primary and secondary trend line
In the above figure, trader draws the primary trend line which reflects longer term price movement of the EURUSD pair.In the confluence of the trend line and support zone a bullish morning star pattern is formed. General trend traders enter the long position with the formation of the bullish morning star with the stight stop loss just below the confirmation candlestick pattern. On the contrary, the advance the advance trader gets multiple opportunities to trade with the trend. Drawing the secondary trendline above the primary trend line requires two connection points.
Professional advanced trend trader successfully identifies the secondary trend line above the primary trend line. The trader enters into the long trade in the secondary trend line with price action confirmation signal. Setting the stop loss in secondary trend line is the bit tricky. Trader tends to use trailing stop loss feature while trading the secondary trend line. The major reversal in an uptrend can also be identified earlier by the break of the secondary trend line. In the above figure, the market broke the secondary trend line and ultimately changed the trend by breaking the primary trend line. Many successful traders often draw successive primary trend line to gauge the strength of the prevailing trend and to protect them from sudden reversal.