The trend is your friend is a much quoted phrase amongst the forex trading community but for very good reason. In general it’s so much easier to trade currencies in the direction of the overall trend than it is to try and trade the peaks and troughs of a particular price move.

Indeed trying to identify overbought and oversold positions is often extremely difficult. There are lots of technical indicators that will help you do this, but the trouble is that an overbought pair can easily go a lot higher and become even more overbought and vice versa for oversold pairs.

This is why it’s so much easier just to identify the trend and trade with this trend until it reverses. It’s easy to spot the current trend. All you do is look at a price chart and if the price is in an upward curve with higher highs and higher lows, it’s in an uptrend, and if it’s heading lower with lower lows and lower highs, then it’s obviously in a downtrend.

Successful forex trading is all about trading high probability positions and trading with the trend ensures that you always have probability on your side. This is because in general the price is always more likely to continue trending than it is to reverse the trend, particularly on the longer time frames.

To further increase your chances of success, you can extend your trend analysis to additional time frames. Indeed this is one of the more profitable ways of trading forex. What you want to look for are instances where a pair is trending in the same direction on two or three different time frames. Then, if it is trending up, for example, on each of these time frames, you would look for occasions when the pair is temporarily oversold on the shortest time frame to get a good entry point for a long position.

This is exactly what I do when I apply my own trading system, except that I only use two main time frames - the 4 hour chart and the daily chart. I use the daily chart for the overall trend before screening down to the 4 hour chart for a good entry point

The key point I want to get across in this article is that if you are new to forex trading, the first lesson you should learn is to always trade with the trend. That way even if your initial entry point was a poor one, you still have a chance of being rescued by the overall trend continuing in the same direction.

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