A strategy “follow and keep the Trend” is basically forecast for a time of great volatility and through two orders to the market (one in each direction) in order to gain in the order that can follow the long trend. We will see in this article an application of this strategy.
Where to apply:
The best time to implement a strategy of
this kind is in times of news that is expected to have great impact on
the volatility of the instrument’s price. Moreover the important is not
forecast the direction but forecast the big volatility time.
We can see in this image bellow a very good day for the implementation of this strategy. In this picture we can see the great bullish trend of the EUR/USD.
How to:
This strategy works as follows:
- Presage the entry point aligned with the news or aligned with an specific indicator;
- Launch 2 orders one BUY and one SELL with low SL and high TP;
- One of the orders will always achieve SL and we expected only on order achieve SL and the other order achieve TP. (e.g. we expected a strong trend in one direction);
- If only one order achieve SL we will win because the TP is much higher than SL;
In this example we used a SL 50 and a TP 250 which allowed a profit of 200 pips (250-50).
Conclusion:
A strategy of this kind can be quite lucrative at moments that can predict a time of great price volatility. It is not suitable when the market will make lateral movements . We have to identify the moment of entry and be vigilant and if the market makes a “no trend” situation we can close the two orders and avoiding the reaching of Stop Loss in both orders.
