Trend Trade With ForexGen

One reasons I want you to study this lesson is because it is too easy to get caught up in a complex method or system. Remember, it doesn't matter what approach you take to the market, the market can only do one of three things:
1. Go Up
2. Go Down
3. Go sideways

The move below is such a classic that it is worth studying. The more you can identify and recognize a good move, t he better the chances you have of becoming a good trader.
Let's have a look at the first daily chart of the GBP/USD (Pound/Dollar). If you look at the red line marked resistance, you can see that the market tested this area twice before but couldn't break through. This is your first clue. The more a market tests an area without breaking thro ugh, the more likely the move will be explosive when it does happen.

In this particular case, the GBP was unable to break the resistance area for months. The market came back up to the resistance area and that is where you would pay careful attention. In a situation like this, the market will normally do one of two things:

1. Break through previous resistance, in which case you could expect a big move.
2. Fail at this level and make its way back down.

Let's look at each scenario. If the market breaks out, we can expect a big move because it has tested this area before and a push above the resistance area will take out a lot of stop loss orders. If this happens we should be ready to jump on and hang on in there until we have reached our target. If we missed the initial breakout, then we should be ready to take advantage of any pullbacks to get in.
The second scenario is that the market fails to break through previous resistance and start back down. If the is the case then there is nearly always an area of consolidation. If the market passes back through support then there is an opportunity to go short.

As it happened the market did break through resistance and never looked back.

Now look at the next chart. The market made its move, which began at point A, made its way up to point B and pulled back to point C. This is a classic Fibonacci move and you should have been ready again for another trade at point C. It doesn't matter what happened after that up bar at point C because you should have been ready and waiting for it to happen and made enough just from that one bar to justify a trade.

Daily Chart of GBP/USD

CANDLESTICK CHART:

A type of trading chart that consists of four major prices: high, low, open and close. The body of the candlestick bar is formed by the opening and closing prices. To indicate that the opening is higher than closing, the body of the bar is left blank. If thee instrument closes below its opening, the body is filled.