Things They Never Tell You to Succeed in Forex

Finding the Trend in Forex - Line method

One of the hardest yet seemingly easiest things to do is find the direction of the trend. If you correctly identify the trend, even if you have bad timing on a trade, you will likely still profit. Just like if you kick a ball up a hill, it will eventually roll back down the hill. So, how do you find the trend? There have many technical ways to find the trend in forex like is price making lower highs or high highs, or is price above or below the 200 moving average. But those methods sometimes give more confusion than actual answers. For example, sometimes 2 different time frames (like daily and weekly) can be moving in opposite directions and then it leaves you basically guessing which way the trends going. Luckily, there is a much simpler way. It's what I like to call it the "Line Method". All you do is draw a line where price action has been heading. Here's an example of the eur/usd (click to enlarge)

When traders try to find the trend in forex, they often fail to look at the big picture and where price is likely to head. 

It's also important to look at fundamental factors affecting the long term outlook. For example, right now it appears the eur has been performing poorly and the fundamental outlook (news) hasn't led me to believe that this will change at least in the near term. 

Now, probably more important is monitoring the trend. Set physical lines on your chats that would be points that make you reevaluate the direction of the trend. In the example above, you might choose 1.155, the nearest major resistance, or maybe a Fibonacci retracement from the previous major high. 

Trading with the trend in forex will greatly increase your profits -- just don't overthink which way the trend is.

See Fibonacci retracement strategy 

Trading Options Using Fibonacci Retracements

Trading using Fibonacci retracements is one of the most simple yet very effective tools you can add on top of almost any binary and standard options strategy. Without going into the math details behind why it works, Fibonacci lines are support and resistance values where price is likely to reverse. The most common retracement values are 23.6%, 38.2%, 50%, and 61.8% towards the previous minimum or maximum. Most charting platforms will draw the retracement lines once you label the the local minimum and maximum. Let me show you some examples from the AUD/USD

Daily price chart for AUD/USD from September to December. Click to enlarge.

Notice how price starts to go back up but then reverses when it hits the 61.8% retracement line and resumes the previous downtrend. Here's another example.

Monthly candlestick chart for AUD/USD. Click to enlarge.

This time price is in an uptrend and starts to go down and then reverses when it hits the 38.2% retracement and then continues the uptrend.

A few important notes when using Fibonacci lines to make money at binary and standard options.

1) Only use Fib. lines when the market is trending. They won't work when the market is ranging as the market would likely retrace all the way back to where price originally was.

2) Fib. lines work better on higher time frames. Price has a much higher change of reversing when it hits a Fig. line based off a 4 hour, daily, weekly, or monthly chart than a 5 min. chart.

3) The Fig. lines should be treated the same as support/resistance lines in terms of when to enter a trade. In other words, wait for conformation in candlestick patterns/price action before entering a trade. Fibonacci lines are another tool that can tell you that price might be reversing. As you can see above, Fig. lines by themselves are by no means a guarantee of reversal. More about candlestick patterns  Here.

2/19/15 Technical Analysis