Forex Trading Blog

One of the most common trading expressions “the trend is your friend” cannot be overstated enough. Trends in the FX-market develop as a result of capital continuously flowing out of one currency and into another. Due to the fact that these fundamental factors may not change for several quarters or even years, it is that important that we focus our attention to these trends, when they develop. For example we can see on the following (daily) chart, the CADJPY has continued to trend to the upside, and has failed to break below its 20-SMA; Simple Moving Average over the past few months. This moving average simply reflects the relationship between the buyers and sellers over a given period of time. Higher rates as well as the rising price of crude oil continue to drawn capital out of the JPY and into the CAD, which has established the trend we see before us. Traders who believe this trend will continue to persist in the near future may choose to ‘go long’ just above this moving average, while placing protective stops below this moving average as well as below recent (low) prices.