Forex trend following strategies are popular among traders who want to make big gains with low risk. In this article, we will review a book on this topic and explore the strategies it recommends.
The book we will be reviewing is titled “Trend Following: How to Make a Fortune in Bull, Bear, and Black Swan Markets” by Michael W. Covel. The book is a comprehensive guide to trend following, which is a trading strategy that involves identifying and following the trends in the market. According to Covel, trend following is a proven strategy that has been used by successful traders for decades.
The book is divided into three parts. The first part of the book provides an overview of trend following and its history. The second part of the book explains the principles of trend following and how to apply them in the Forex market. Finally, the third part of the book provides case studies of successful trend following traders.
One of the key principles of trend following is to identify trends early and ride them for as long as possible. This means that traders need to be patient and disciplined, as they may need to wait for weeks or even months for a trend to develop. Once a trend is identified, traders need to have a system in place to manage their positions and limit their losses.
One of the strategies recommended by Covel is to use a moving average crossover system. This involves using two moving averages, one short-term and one long-term. When the short-term moving average crosses above the long-term moving average, it is a signal to buy. Conversely, when the short-term moving average crosses below the long-term moving average, it is a signal to sell.
Another strategy recommended by Covel is to use a breakout system. This involves identifying key levels of support and resistance and buying or selling when the price breaks through these levels. This strategy requires traders to be patient and wait for the right opportunities to arise.
Covel also emphasizes the importance of risk management in trend following. Traders should always have a stop-loss in place to limit their losses if the market moves against them. Additionally, traders should never risk more than a certain percentage of their trading account on any one trade.
Overall, “Trend Following” is a valuable resource for traders who want to learn more about this popular trading strategy. The book provides a comprehensive overview of trend following and offers practical advice on how to apply it in the Forex market. While trend following may not be suitable for all traders, those who are patient and disciplined may find it to be a profitable strategy.
