Forex Focus  |  OCT 2007

Forex Focus: Surviving The Trappings Of Trends by Cornelius Luca

Forex Focus: Surviving The Trappings Of Trends by Cornelius Luca Faced with a choppy trend? Here’s how to analyze a trend and identify some realistic opportunities. AH! the dream and promise of trends! Traders rightfully seek and try to follow them. However, staying with the trend is not for the fainthearted, and unless you are Warren Buffett or have similarly deep pockets, you may not be able to survive the experience. The average trader will have to learn to shift between both short-term and medium-term strategies, and the long and short directions, regardless of the direction of the major trend. Trends are sustained directions that last a minimum of five weeks or so, and a long-term trend will last more than a year. While buying near the lowest levels and selling near the top is always a nice fantasy, let’s analyze a trend and identify some more realistic opportunities. OPPORTUNITIES IN TRENDS Figure 1 shows the euro/dollar pair rising between the middle of November 2005 to late May 2006. This medium-term uptrend was the initial rising leg of the trend that formed between November 15, 2006, and January 23, 2007, a pullback between January 24, 2007, and February 27, 2007, and the second rising leg between February 28, 2007, and May 15, 2007.

by Cornelius Luca