Forex Trend Trading is How to Win in Forex

Forex Trend Trading is How to Win in Forex - InvestGrowRepeat.com

I’m going to prove to you that forex trend trading is how to win in forex. There are some who claim that it is foolish to buy something that is rising in value, but I think they are foolish for selling (going short) something rising in value.

If a currency pair, such as the EUR/USD, is rising in value then a trader can make money by buying the pair in order to later sell it for a higher price. Likewise, if the EUR/USD is decreasing in value then a trader can make money by selling the pair in order to later buy it back cheaper.

Why would anyone buy something that is decreasing in value? That is like buying a million dollar house that you know will be worth only half a million when you want to sell it in 5 years. Is that smart?

Related: Stocks vs Forex: Why Trade Forex?

The problem with this type of thinking is that most forex traders fail to understand just how massive the forex market is compared to retail traders. The Forex market is so much larger than all retail traders combined.

In fact, the forex market is so large that all individual retail traders collectively have almost no effect on it long-term.

The entire trading capital of all forex retail traders combined is less than $200 Billion, and that’s a large estimate. Yet the daily volume of the forex market is generally over $5,000 Billion ($5 Trillion).

Look at the difference in forex daily volume between all retail traders and the other market participants:

Forex Daily Volume in Billions (USD): Retail Traders vs Central Banks & Financial Institutions - InvestGrowRepeat.comForex Daily Volume in Billions (USD): Retail Traders vs Central Banks & Financial Institutions

Forex retail traders make up less than 4% of the daily forex volume.

Do you really think that 4% of the market is going to have any meaningful influence long-term?

It is the other 96% of the forex market, consisting of the central banks of entire countries, large financial institutions, and huge international businesses that have influence in the forex market. These unimaginably large money-powerhouses control the overall effects of supply and demand.

Retail traders have virtually no meaningful effect on supply and demand in forex.

This difference between retail traders and other forex participants is so significant that even if every single retail trader were to sell the rising EUR/USD, it might have a dip for one day, but ultimately it would keep rising in value.

Don’t believe me? Let me prove it to you.

Trader Sentiments Prove the Insignificance of Retail Traders in Forex

Just take a look at forex trader sentiments on any currency pair that has been trending for at least 4 to 6 months, and you will likely see more than 70% (or close to it) of traders on the wrong side of the trade.

For example, if the EUR/USD has been going up for 6 months, then roughly 70% of retail traders will have sold the pair…yet the trend keeps going up even though 70% of retail traders have sold the EUR/USD. Even if 100% of retail traders sold the EUR/USD when it was rising, it would keep on going up as if retail traders didn’t even exist.

That’s because retail traders have virtually no effect on the market! The forex market is too big!

So the point is that retail traders are not going to change the market direction, which means it pays to be a follower in forex.

Related: Top 3 Reasons Why You Should NOT Daytrade Forex

It Pays to Be a Follower in Forex

If you set your chart to 1 day candlesticks (or anything larger), then you will see mega-trends that last for months at a time (and sometimes even years). Typically, as a currency pair trends in a certain direction, the number of retail traders getting on the wrong side of the trade also increases.

Here's the proof:

The following is trader sentiments (long vs short) for an entire year on the EUR/USD provided by OANDA.

Notice a trend?

As the price goes up (black line), the percentage of traders selling the pair (orange) increases! That’s insane! Likewise, as the price goes down, the number of traders buying the pair (blue) increases.

No wonder forex retail traders lose so much money. They are following the illogical thought process that it is foolish to buy something increasing in value…so they short it? I have already discussed why retail traders are always getting on the wrong side of the trade: The Number 1 Mistake Made by Forex Traders.

So here, we want to talk about what profitable retail traders do.

What do consistently profitable retail traders do? They follow the money!

Here’s an example from the GBP/NZD currency pair trending at an average of 23 pips per day for 2 months:

That’s a guaranteed average of 23 pips per day trading long-term. If you had made this long-term trade with 100,000 units, which requires only $2,000 as margin, then you would have made over $12,000 on this trade in about 2 to 3 months! That's a 600% return on your money! And that’s a conservative estimate – technically it would have been about $14,000 depending on when you exited the trade.

So it pays to be a follower in forex.

If you want to win in forex, then you need to follow the big money because they control the market.

Want my advanced forex knowledge?

Learn how I win with advanced risk-reducing techniques and leverage management, as well as the buy/sell signals I use. Normally available for $50, you can have access for only $29.

 

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Disclaimer: Purchasing does not guarantee success, although it may significantly increase your chances of success – you are always trading at your own risk. All transactions are final.

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