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12 Unbreakable Rules For Trend Trading

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Trend trading can make you lots of money in the forex market if you can:

  • correctly identify trends
  • get into a trade at the right time
  • and ride out the trend

So here are 12 Trend Trading Rules every forex trader needs to know and follow:

#1: Trade What You See, Not What You Think

Trend Trading Rules Trade What You See And Not What You Think

Many times, I see a trade setup that I know I should take…but guess what? I start to question it, I start to analyse it a lot more than I should and many times, I would not take that trade. Later when I check the setup, the market has reacted  based on what ” I saw” and not on what I thought.


#2: Read The Charts, Not The News

Trend Trading Rules Read the Charts and Not The News

This simply means, you can make all your trading decisions to buy and sell based on the charts. When you read news about certain things you want to confirm before you buy or sell, then the issue here is the fact that you are now trying to get someone’s opinion to influence your trading decisions and when you get back to your charts, you will see your chart telling you that its the right time to buy or sell but the news that you’ve just read tells you something different. Now you have two conflicting decisions.

#3: Learn To Set And Forget Your Trades

Some of my best trades happened when I simply set and “forget”. What do I mean by that? Well, it means I entered into a trend trade and simply made up my mind that I will not move my stop loss to break even too soon or move my trailing stop too closely or take profit too early but simply just let the market to its job.

By doing that, you avoid exiting too early when you should have made a lot more profit:

Trend Trading Rules Learn to set and forget your trades

#4: Buy Dips In An Uptrend

Trend Trading Rules Buy Dips In An Uptrend

The reason is pretty simple for buying dips in an uptrend:

  • you get in at the best price
  • your stop loss is tight and that means you increase your Risk:Reward ratio and therefore should the trade go in the direction of the main trend again, you stand to make a lot more profits.


#5: Sell Rallies In A Downtrend

Trend Trading Rules Sell Rallies In A Downtrend

Similar to buying dips in an uptrend, for downtrend, you should sell rallies and the reason are the same as those of buying dips:

  • best entry price levels
  • tight stop loss and good risk:reward ratio of trades

#6: Don’t Try To Pick The Tops Or Bottom

Trend Trading Rules Dont Try to pick the top or bottom

There will be times when you will pick tops and bottoms precisely based on your forex trading systems but then there will be times when you won’t. Don’t spend all your effort trying to pick tops and bottoms.

There’s  a saying that says: Don’t try to catch a falling knife.

#7: Cut Your Trading Losses Short

Trend Trading Rules Cut Your Loses Short

A wise trader always cuts his loses short. He knows there will be another day when he can trade the opportunities that will come.

#8: Let Your Profits Run

Trend Trading Rules Let Your Profits Run

If you cut your losses short and let your profits run, what do you think that will happen to your forex trading account? Simple, it will increase because you are making more profits than you lose.

#10: Multiply Profits: Apply The Pyramid Trading Technique

Trend Trading Rules Apply Pyramid Trading Technique

One of the best ways to increase your trading profits so fast is to apply the pyramid trading technique. You do this without increasing your trading risk at all.

#11: Keep A Long Term View

Trend Trading Rules Keep a long term view of your trades

Trend trader should keep a long term view of the open positions. At the back of you mind you should be thinking that: “This trend can do on for many days.” Look at where price has been in the past on those larger timeframe. Can you see the previous swing highs and swing lows?

You see, if price has been there in the past, it can go there again.

This is term thinking. This is long term view.

Know that as the price moves towards your profit target, it will have daily fluctuations and during the initial stages near your entry level, you may have a floating loss for days until the market moves in the desired direction.

So having a long term view is imperative in trend trading. And once the trend kicks it, now that market has its upswings and downswings while it is in a trend and those shouldn’t deter you thinking the trend is changing.


#12: Stick To The Trading Plan

Trend Trading Rules Stick To The Trading Plan

A trading plan should be simple and robust enough to cover all the basics like:

  • when do you enter a trade and what conditions have to be met. This mostly will come from your trading system’s rules.
  • how much do you risk on a trade
  • what trading sessions or what trading times you have to trade.
  • do you have to trade everyday as a day trader or are you more of a swing trader/trend trader type?
  • your maxing consecutive trading loses before you  quit trading for the day or for a while.
  • where will you exit?
  • where will you take profit?
  • how will you trail stop your trades?
  • how will you apply your trail stop technique

These are some of the things that should be included in your trading plan.

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