12/10/2014
Trick #4: Trend Trading Requires Courage & Money Smarts
If you want to become a trend-trader, you are going for the big moves. You are NOT going to be trying to get 10 pips on each trade (I talk about that here: http://www.robbooker.com/books/Strategy10.pdf). You’re going to want to get 50 to 500, and maybe even many more pips, when you are trend trading.
To do this you are going to have to commit yourself to a patient process of waiting for a trend to develop, and then to stay in your trades. Most currency traders are focused on the short term – and there are lots of jumps up and down in the short term. Have you ever noticed that after a major economic release, a currency pair will initially move in the direction you expect it to go, but then all of the sudden it will move the opposite way?
Take, for instance, a Non Farm Payroll report where the number is low, or in other words, “bad” for the US Dollar. And then, all of the sudden, the US Dollar grows stronger anyway! This infuriates traders. I get at least 50 emails every time a major economic report comes out, with questions just like this. It’s a great question. And the answer is often that the trend was more dominant than the news.
Let’s take the example of a recent downtrend in the GBP/USD on the 1 hour chart. Move on to the next page and let’s see the example:
Figure 4.1. The GBP/USD, on the 1 hour chart, temporarily spiked upwards after a Non Farm Payroll report.
