Forex Containing the trend

Well lads I can't trade in the meantime so I might as well share some of my principles.

Containing the trend -

Q1. What do I mean by this?

Ans. Containing the trend mean literally containing it on a higher time frame so that the opportunity for an entry on the lower time frame is reduced considerably.

Q2. Wait, What?

Ans. Yes, containing a trend is important because forex has a bad habit of giving false signals. A trading system which is not successful on one time frame may(I said 'may' not 'will') not be successful on other timeframes. This is bad, very bad. We are doing the exact opposite of what most traders do i.e. reduce the number of opportunities but this increases the probably considerably. A very successful system works on all and yes I am also talking about 1 minute timeframe. The problem with 1 minute timeframe has always been the cost of doing business otherwise no other timeframe trends like it.

Q3. How is that?

When you contain a trend, it doesn't have enough space to more without trending in the opposite direction. Yes it could move in the opposite direction by being flat and creating a candlestick pattern famously known as doji or indecision or whatever but if the rules on the lower times frame are applied properly a fake signal becomes very unlikely.

Q4. But why do this?

Why not? Trend containment can help you filter you entries so much that it turns a losing system into a winning one. I have applied this philosophy to many many systems on Forex factory to turn them into highly profitable systems. Trading is about edge. If you don't have it, you are just running around like a headless chicken. Every system can be filtered using trend containment but many system then give very few entries for the system to be successful. You would be making peanuts. You could say that, "hey, we will invest huge money on those very few very high probability signals and make huge money" but that's just stupid money management. Trend containment contains a good trend and at the same time gets rid of flat markets. Flat markets, if your principles for trend containment are valid then they will be mostly eliminated. Every market can use trend containment.

Q5. OK, so how to do it?


To be continued.....

Source.