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The Double Trend Trap Strategy for Forex

TradingPub Admin | April 1, 2014

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We have summarized some of our best trading education from past events and coupled it with the video used to produce the summary.  Hopefully this will help you browse through the content and see if this is something you can benefit from reading and/or watching.

Before you read this article, we want you to answer a question honestly...

Is what you are doing currently working? By working, we mean is it profitable month after month for you?

If you hesitate to answer that question or if the answer is anything but a resounding YES, then please read through the following strategy setup with an open mind.

Here is a fresh approach that we have summarized used by some of the pros called the "Double Trend Trap Strategy".

The report and the video will serve you by:

  1. Better explaining this Forex trading strategy
  2. Showing you how to filter through bad trend-line trades which can potentially result in improved accuracy and higher returns.

So traders, to put it in simple words you must first define the trend, so you can then define your actions based on that information, but as you know clear trends are "easier said than found".

Well, once you have found a down trend, let's say, then you do not just short the market and hope for the best, instead you look for a qualified opportunity to trade in your direction. You will then look for an opportunity to short the market at a better price, which is a fancy way to say, you are looking for a pullback trend:

Pull Back Trend

However, do not just look for a pullback and short it (like most retail traders do and lose their money).  At this point you will not know if the pullback is just starting or ending and that is where the issue lies. More often than not, the market will spike up and hit your stop loss before the trend resumes. And even though you traded in the right direction you still lost money.

Here is a better way to qualify the entry. You can see a well structured down trend on this GBP/USD chart below. to find the entries, draw trend lines using either the 15 minute or hourly chart, as seen in the image below. After a few touches with the trend line it is considered a quality one. Now, you know you can take a short trade when the trade line is broken. Keep in mind that not all charts will be so clear, but the strategy works when you can apply it.

GBPUSD 03.31.14

To summarize, when you define a trend, look for pullbacks and at that point your main goal is using other tools to filter out the false moves.

One of the best ways to filter out bad trades is to use momentum. Many traders do not realize that a trend line break without momentum means hardly anything. Here is a suggested indicator traders can use to improve accuracy- the Strike Momentum Indicator (SMI):

Strike Momentum Indicator 03.31.14

You can plug the SMI in to any Forex pair on the MT4 terminal . It works on 5, 15, 30 minute and hourly charts as it is specifically designed for intraday trend line break strategy. The indicator is constantly scanning for momentum in the market  and couples this with valuable information. When the SMI finds momentum it will draw a line, much like the one in the chart below as shown here:

SMI Active Chart 03.31.14

If you want to learn more about the Double Trend Trap Strategy, you can download the full report at the link below:

Errow

Download here

 

Double Trend Trap Strategy Video