Top 5 Best Forex Trend Following Strategies That Work

Trend following strategies are trading strategies in which traders trade only in a trending market and trade directions are taken in the direction of the trend. When price is constantly going up, then traders should be buying. If price is constantly going down, then traders should be selling or shorting the market.
Trend trading adheres to the idea that trades should be taken where the market is flowing. It is a very logical trading philosophy since trading with the flow of the market is supposedly easier compared to trading against it. Imagine swimming upstream against the flow of a river. Would it not be easier to swim downstream? The same idea holds true with trend following. Traders try to identify the direction of the trend and trade with it.
There are many ways to trade with the trend. Some trade on retracements while others trade at the start of a momentum. Others trade using technical indicator signals alone while others trade purely based on price action.
Below are five different strategies that traders could apply during an established trending market.
 
<h2>MA Retrace Forex Trend Following Strategy</h2>
Trading on established trends is very logical. If you would look at historical charts and use any indicator that could help traders identify the trend, you would notice how predictable price movements often are once the trend is established.
Yet despite its seemingly very predictable movement patterns, trading on established trends is often very tricky. This is because most trend following strategies require traders to trade when price is at the peak of its current expansion phase.
Instead of buying when the market is at the peak of a bullish trend or at the trough of a bearish trend, traders should be trading on the retracements. Traders who have learned the skill of timing entries on retracements could easily make money from a trending market.
<h3>Guppy Multiple Moving Average</h3>
Moving averages are probably the simplest types of indicators. Yet this simple indicator is probably one of the most effective tools traders could use in a trending market condition.
Price moves in a series of expansions and retracements during a trending market. Price would rapidly move in the direction of the trend then retrace back to its mean. Logic would tell us that it is best to enter trades in the direction of the trend during a retracement and exit the trade at the expansion phase. However, this is easier said than done. It is quite difficult to time retracements.
Moving averages are often used as a gauge measuring the depth of a retracement. This allows traders to better assess whether price has retraced deep enough to warrant an entry based on a retracement or not. Price would often bounce off moving averages thus it is often used as a dynamic area of support and resistance.
The Guppy Multiple Moving Average (GMMA) is a trend following indicator that makes use of multiple moving averages. This creates a band of moving averages which expands during a trending market and contracts as the trend starts to fade.
It is also an effective tool to use as a dynamic area of support and resistance. Price would often retrace to the moving averages and bounce off during a trending market condition.
<h3>MUV Indicator</h3>
The MUV indicator is a modified moving average indicator based on Tom Demark’s TD Moving Average.
This custom moving average indicator was intended to identify stop loss placements and exit points. However, in a trending market where there are multiple retracements, it could also be used to identify the end of a retracement. This is when price closes above it after a retracement on a bullish trend, or below it after a retracement on a bearish trend.
<h3>Trading Strategy</h3>
This trading strategy is a simple trend following strategy which provides entries right after a retracement.
It uses the Guppy Multiple Moving Average indicator as a basis for the depth of the retracement and the dynamic area of support and resistance. Price should retrace towards the GMMA then bounce off it. As price bounces off the GMMA lines, it should then close beyond the MUV line indicating that the retracement has ended and price is ready to start a new expansion phase in the direction of the trend.
In order to align the trades with the long-term trend, the 200 Exponential Moving Average (EMA) will be used as a trend filter. Price, as well as the MUV and GMMA lines, should be on the correct side of the 200 EMA according to the direction of the trend.
Indicators:
<ul>
<li>200 EMA</li>
<li>MUV.ex4</li>
<li>GMMA_Long.ex4</li>
</ul>
Timeframes: 15-minute, 30-minute, 1-hour, 4-hour and daily charts
Currency Pairs: major and minor pairs
Trading Session: Tokyo, London and New York sessions
<h3>Buy Trade Setup</h3>
Entry
<ul>
<li>Price, the MUV line and the GMMA lines should be above the 200 EMA indicating a bullish trend.</li>
<li>The 200 EMA should be sloping up indicating a bullish long-term trend.</li>
<li>Price should retrace towards the GMMA lines and bounce off it.</li>
<li>Price should then close above the MUV line indicating the end of the retrace and the probable start of a bullish expansion phase.</li>
<li>Enter a buy order on the confirmation of the conditions above.</li>
</ul>
Stop Loss
<ul>
<li>Set the stop loss at the fractal below the entry candle.</li>
</ul>
Take Profit
<ul>
<li>Set the take profit target at 1.5x the risk on the stop loss.</li>
</ul>
<img class="alignnone size-full wp-image-64102" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/MA-Retrace-Forex-Trend-Following-Strategy-1.png" alt="MA Retrace Forex Trend Following Strategy 1" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/MA-Retrace-Forex-Trend-Following-Strategy-1.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/MA-Retrace-Forex-Trend-Following-Strategy-1-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/MA-Retrace-Forex-Trend-Following-Strategy-1-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<img class="alignnone size-full wp-image-64101" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/MA-Retrace-Forex-Trend-Following-Strategy-2.png" alt="MA Retrace Forex Trend Following Strategy 2" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/MA-Retrace-Forex-Trend-Following-Strategy-2.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/MA-Retrace-Forex-Trend-Following-Strategy-2-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/MA-Retrace-Forex-Trend-Following-Strategy-2-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<h3>Sell Trade Setup</h3>
Entry
<ul>
<li>Price, the MUV line and the GMMA lines should be below the 200 EMA indicating a bearish trend.</li>
<li>The 200 EMA should be sloping down indicating a bearish long-term trend.</li>
<li>Price should retrace towards the GMMA lines and bounce off it.</li>
<li>Price should then close below the MUV line indicating the end of the retrace and the probable start of a bearish expansion phase.</li>
<li>Enter a sell order on the confirmation of the conditions above.</li>
</ul>
Stop Loss
<ul>
<li>Set the stop loss at the fractal above the entry candle.</li>
</ul>
Take Profit
<ul>
<li>Set the take profit target at 1.5x the risk on the stop loss.</li>
</ul>
<img class="alignnone size-full wp-image-64100" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/MA-Retrace-Forex-Trend-Following-Strategy-3.png" alt="MA Retrace Forex Trend Following Strategy 3" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/MA-Retrace-Forex-Trend-Following-Strategy-3.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/MA-Retrace-Forex-Trend-Following-Strategy-3-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/MA-Retrace-Forex-Trend-Following-Strategy-3-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<img class="alignnone size-full wp-image-64099" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/MA-Retrace-Forex-Trend-Following-Strategy-4.png" alt="MA Retrace Forex Trend Following Strategy 4" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/MA-Retrace-Forex-Trend-Following-Strategy-4.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/MA-Retrace-Forex-Trend-Following-Strategy-4-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/MA-Retrace-Forex-Trend-Following-Strategy-4-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<h3>Conclusion</h3>
This type of trading strategy is one of the most basic types of trend following strategies. It provides re-entries based on retracements towards a dynamic area of support or resistance allowing traders to enter trades at a better price rather than chasing price on the expansion phase.
This strategy makes use of a fixed 1.5x reward-risk ratio. However, traders who have a different risk appetite could tweak this. Having a higher take profit target multiplier provides a better reward-risk ratio but could probably lower the win ratio, while lower multipliers could improve the win ratio yet lower the reward-risk ratio.
Other traders opt to exit trades manually instead of using a fixed take profit target ratio. Theoretically, this should produce the best results, however fear, greed and other emotional factors would often cause traders to either exit trades too early or close a profitable trade too late. This often results in a lower growth expectancy for the trading account.
 
<h2>Fisher Optimum Forex Trend Following Strategy</h2>
Another key to identifying trade entry opportunities in a trending market condition is by using disruptions and realignments of confluences as an indication of a temporary retracement and a resumption of a trend.
Confluences are an integral part for most strategies and trend following strategies are not an exception to this. Traders often take trades whenever trade signals coming from various indications align. Often, trades coming from a confluence of factors would result in a trend. There are instances when one or two of the factors that indicate trend direction would temporarily reverse. This is often the case when a retracement occurs. However, it is just temporary. The trend may resume its initial trend direction as soon as confluences align.
The Fisher Optimum Forex Trend Following Strategy is a strategy that makes use of an indicator to identify short-term retracements during a trending market condition.
<h3>i-AMA Optimum</h3>
The i-AMA Optimum indicator is a custom indicator based on the Adaptive Moving Average (AMA) developed by Perry Kaufman.
The i-AMA Optimum is a modified moving average indicator which is optimized for identifying mid- and long-term trends. It is characterized by a moving average line that follows price closely in a low noise market condition, yet it also tends to be smoother than other moving averages when in a choppy market.
<h3>Fisher Yur4ik</h3>
The Fisher Yur4ik indicator is an oscillating indicator which displays histogram bars to indicate trend direction. Positive bars indicate a bullish trend while negative bars indicate a bearish trend.
The Fisher Yur4ik indicator thrives on the short- and mid-term trends. Short fluctuations caused by retracements could cause the Fisher Yur4ik indicator to reverse temporarily even when the long-term trend is still in place.
<h3>Trading Strategy</h3>
The Fisher Optimum Forex Trend Following Strategy is a strategy which trades on retracements towards the mid-term mean while the long-term trend is still in place and is still clearly trending.
The 200 Exponential Moving Average (EMA) line is used to identify the long-term trend direction. Trend direction is based on the location of price in relation to the 200 EMA. Price above the 200 EMA indicates a bullish trend while price below the 200 EMA indicates a bearish trend. However, aside from price, the i-AMA Optimum should also be on the correct side of the 200 EMA. The i-AMA Optimum line should be above the 200 EMA line on a bullish trend and below the 200 EMA on a bearish trend.
Aside from the location of price and the i-AMA line, the slope of the 200 EMA would also be used to indicate trend direction. Upward sloping 200 EMAs indicate a bullish trend while downward sloping 200 EMAs indicate a bearish trend. Steeper slopes indicate a stronger trend while flatter slopes would indicate a weak trend.
To identify a valid entry, price should retrace towards the area of the i-AMA Optimum indicator. This retracement should cause the Fisher Yur4ik bars to temporarily reverse. The trend is then considered to have resumed its initial direction as soon as the Fisher Yur4ik indicator agrees with the trend direction of the 200 EMA. This should also be aligned with price crossing over the i-AMA Optimum indicator going towards the direction of the prevailing trend.
Indicators:
<ul>
<li>200 EMA</li>
<li>i-AMA-Optimum.ex4</li>
<li>Fisher_Yur4ik.ex4</li>
</ul>
Timeframe: 15-min, 1-hour and 4-hour charts
Currency Pairs: major and minor pairs
Trading Session: Tokyo, London and New York session
<h3>Buy Trade Setup</h3>
Entry
<ul>
<li>Price should be above the 200 EMA indicating a bullish long-term trend.</li>
<li>The i-AMA Optimum line should be above the 200 EMA.</li>
<li>The 200 EMA line should be sloping upward indicating a bullish long-term trend.</li>
<li>Price should retrace towards the i-AMA Optimum line.</li>
<li>The Fisher Yur4ik indicator should temporarily display negative red histogram bars during the retracement.</li>
<li>Enter a buy order as soon as the Fisher Yur4ik bars becomes a positive lime histogram while the candlestick closes as a bullish candle.</li>
</ul>
Stop Loss
<ul>
<li>Set the stop loss on the fractal below the entry candle.</li>
</ul>
Exit
<ul>
<li>Close the trade as soon as the Fisher Yur4ik indicator prints negative red bars.</li>
</ul>
<img class="alignnone size-full wp-image-64106" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fisher-Optimum-Forex-Trend-Following-Strategy-1.png" alt="Fisher Optimum Forex Trend Following Strategy 1" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fisher-Optimum-Forex-Trend-Following-Strategy-1.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fisher-Optimum-Forex-Trend-Following-Strategy-1-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fisher-Optimum-Forex-Trend-Following-Strategy-1-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<img class="alignnone size-full wp-image-64105" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fisher-Optimum-Forex-Trend-Following-Strategy-2.png" alt="Fisher Optimum Forex Trend Following Strategy 2" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fisher-Optimum-Forex-Trend-Following-Strategy-2.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fisher-Optimum-Forex-Trend-Following-Strategy-2-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fisher-Optimum-Forex-Trend-Following-Strategy-2-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<h3>Sell Trade Setup</h3>
Entry
<ul>
<li>Price should be below the 200 EMA indicating a bearish long-term trend.</li>
<li>The i-AMA Optimum line should be below the 200 EMA.</li>
<li>The 200 EMA line should be sloping downward indicating a bearish long-term trend.</li>
<li>Price should retrace towards the i-AMA Optimum line.</li>
<li>The Fisher Yur4ik indicator should temporarily display positive lime histogram bars during the retracement.</li>
<li>Enter a sell order as soon as the Fisher Yur4ik bars becomes a negative red histogram while the candlestick closes as a bearish candle.</li>
</ul>
Stop Loss
<ul>
<li>Set the stop loss on the fractal above the entry candle.</li>
</ul>
Exit
<ul>
<li>Close the trade as soon as the Fisher Yur4ik indicator prints positive lime bars.</li>
</ul>
<img class="alignnone size-full wp-image-64104" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fisher-Optimum-Forex-Trend-Following-Strategy-3.png" alt="Fisher Optimum Forex Trend Following Strategy 3" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fisher-Optimum-Forex-Trend-Following-Strategy-3.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fisher-Optimum-Forex-Trend-Following-Strategy-3-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fisher-Optimum-Forex-Trend-Following-Strategy-3-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<img class="alignnone size-full wp-image-64103" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fisher-Optimum-Forex-Trend-Following-Strategy-4.png" alt="Fisher Optimum Forex Trend Following Strategy 4" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fisher-Optimum-Forex-Trend-Following-Strategy-4.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fisher-Optimum-Forex-Trend-Following-Strategy-4-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fisher-Optimum-Forex-Trend-Following-Strategy-4-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<h3>Conclusion</h3>
This trading strategy is an excellent trend following strategy that trades on retracements. It produces trade setups with potentially high reward-risk ratios. This allows traders to gain big on just a few trades. However, tight stop losses often cause trades to be prematurely stopped out. This is because at times the Fisher Yur4ik indicator could be a bit too early on the reversal. Traders could opt to place the stop loss a bit further to allow price to have some wiggle room. This would lessen the reward-risk ratio but would improve the win ratio.
It is also best to use this strategy in confluence with a price action type of strategy. It could either be a breakout of a support or resistance line or a candlestick pattern. Trades that are combined with price action setups often get better results.
 
<h2>Fibonacci Pullback Forex Trend Following Strategy</h2>
Although price action trading seems to starkly contrast technical analysis trading that are based on technical indicators, trading using price action is another form of technical analysis that works well in trading. In fact, there are traders who swear by trading with naked charts and price action analysis alone.
The beauty of trading with price action is that it is based on analysis that has theoretically little lag. The only lag that traders get is when they are waiting for the candle to close. This allows traders to time the entry more effectively based on their own judgement. However, traders who are quite new to trading based on price action tend to have lower accuracy when it comes to identifying effective entries. This skill comes with practice, screen time, and experience. Traders who have mastered it though tend to enter trades just at the right time and are able to squeeze out the most pips out of a single trade.
Price action trading is a very effective time of strategy when used in a trending market condition. Trend is easily identified since the market would typically be making higher highs and lows on a bullish market, and lower highs and lows on a bearish market. This allows traders to become very accurate in identifying trend direction.
Anticipating where price would pullback to is a different story. Using a naked chart, it is quite difficult for most new traders to identify where the pullback would reach. This is where Fibonacci ratios come in to play. Price tends to pullback to certain levels of a Fibonacci ratio. There are no clear explanations why it works, but it works. Price would usually tend to pullback to the 38.2 ratio during an extremely strong momentum trend, and at around 50 and 61.8 ratio during a moderate trend. The Fibonacci Pullback Forex Trend Following Strategy makes use of this information to anticipate pullbacks and make entry decisions based on price action occurring in these areas.
<h3>ZigZag Indicator</h3>
The ZigZag indicator is a very valuable tool that traders could use. This indicator identifies swing highs and swing lows and connects these points with a line forming a zigzag pattern. This allows traders to visually identify where the swing points are and make use of such information for their trading strategies.
Traders who trade reversals on support and resistance points or supply and demand zones could use the swing points as a basis for a horizontal support or resistance or a supply and demand zone.
Price action traders could also identify trend direction using this indicator. Markets that are constantly making higher highs and lows are technically a bullish trending market. On the other hand, markets that are constantly making lower highs and low are considered as a bearish trending market.
<h3>Fibonacci Retracement Ruler</h3>
The Fibonacci retracement ruler is basically a tool that is built-in on every MT4 platform. However, many new traders overlook this tool because of lack of knowledge on how to use it.
To use the Fibo ruler, traders would attach one end of a ruler on one swing point and connect it to connect the other end to another swing point. The tool then displays the price points where the ratios of a pullback or retracement is expected.
<h3>Trading Strategy</h3>
This strategy is a simple trend following strategy which trades on pullbacks found on trending market conditions using the ZigZag indicator.
To identify a trending market, traders must observe if the swing highs and swing lows as displayed by the ZigZag indicator are either forming higher highs and lows, or lower highs and lows. If so, the market could be considered trending.
The Fibonacci retracement ruler is then connected from one swing point to another to identify the price range of the ratios.
This strategy trades on deep retracements found on regularly trending markets. As such, we will be anticipating price rejection and reversal after a retracement on the range between the 50 and 76.4 ratio. A rectangular box could be placed on this range to mark where we would be looking for signs of price rejection and reversal.
A trade entry could be considered if a reversal candlestick pattern occurs on this area. If price action indicates that price could be reversing, then a trade could be taken. If the swing point is accurate, this would then be confirmed by an arrow displayed by the ZigZag Arrows indicator and soon be attached with a line coming from the ZigZag indicator.
The take profit targets will be placed on the opposite swing point. Although price should breach these points, we will be using these take profit targets as a conservative target.
Indicators:
<ul>
<li>ZigZagFirst.ex4</li>
<li>zigzagarrows.ex4</li>
</ul>
Timeframe: 15-minute, 30-minute, 1-hour and 4-hour charts
Currency Pairs: major and minor pairs
Trading Session: Tokyo, London and New York sessions
<h3>Buy Trade Setup</h3>
Entry
<ul>
<li>The ZigZag indicator should indicate that the market is constantly forming higher highs and higher lows indicating that the market is on a bullish trend.</li>
<li>Set the Fibonacci retracement ruler along the ZigZag line from the swing high to the swing low.</li>
<li>Wait for price to retrace towards the 50 and 76.4 Fibonacci ratio area.</li>
<li>Enter a buy order as soon as a bullish reversal candlestick pattern is observable on that area.</li>
</ul>
Stop Loss
<ul>
<li>Set the stop loss on the fractal below the entry candle.</li>
</ul>
Take Profit
<ul>
<li>Set the take profit target at the swing high based on the ZigZag line.</li>
</ul>
<img class="alignnone size-full wp-image-64110" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fibonacci-Pullback-Forex-Trend-Following-Strategy-1.png" alt="Fibonacci Pullback Forex Trend Following Strategy 1" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fibonacci-Pullback-Forex-Trend-Following-Strategy-1.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fibonacci-Pullback-Forex-Trend-Following-Strategy-1-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fibonacci-Pullback-Forex-Trend-Following-Strategy-1-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<img class="alignnone size-full wp-image-64109" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fibonacci-Pullback-Forex-Trend-Following-Strategy-2.png" alt="Fibonacci Pullback Forex Trend Following Strategy 2" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fibonacci-Pullback-Forex-Trend-Following-Strategy-2.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fibonacci-Pullback-Forex-Trend-Following-Strategy-2-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fibonacci-Pullback-Forex-Trend-Following-Strategy-2-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<h3>Sell Trade Setup</h3>
Entry
<ul>
<li>The ZigZag indicator should indicate that the market is constantly forming lower highs and lower lows indicating that the market is on a bearish trend.</li>
<li>Set the Fibonacci retracement ruler along the ZigZag line from the swing low to the swing high.</li>
<li>Wait for price to retrace towards the 50 and 76.4 Fibonacci ratio area.</li>
<li>Enter a sell order as soon as a bearish reversal candlestick pattern is observable on that area.</li>
</ul>
Stop Loss
<ul>
<li>Set the stop loss on the fractal above the entry candle.</li>
</ul>
Take Profit
<ul>
<li>Set the take profit target at the swing low based on the ZigZag line.</li>
</ul>
<img class="alignnone size-full wp-image-64108" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fibonacci-Pullback-Forex-Trend-Following-Strategy-3.png" alt="Fibonacci Pullback Forex Trend Following Strategy 3" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fibonacci-Pullback-Forex-Trend-Following-Strategy-3.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fibonacci-Pullback-Forex-Trend-Following-Strategy-3-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fibonacci-Pullback-Forex-Trend-Following-Strategy-3-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<img class="alignnone size-full wp-image-64107" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fibonacci-Pullback-Forex-Trend-Following-Strategy-4.png" alt="Fibonacci Pullback Forex Trend Following Strategy 4" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fibonacci-Pullback-Forex-Trend-Following-Strategy-4.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fibonacci-Pullback-Forex-Trend-Following-Strategy-4-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Fibonacci-Pullback-Forex-Trend-Following-Strategy-4-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<h3>Conclusion</h3>
Price action and naked chart traders typically trade in this manner. However, it takes skill and experience to identify the swing points correctly. This method, using the ZigZag indicator, allows traders to easily identify swing points and thus effectively trade on retracements.
Some price action traders prefer to set a higher take profit target as advised in this strategy. Traders with higher risk appetites could opt to do the same. Some would opt to set the take profit target based on the length of the current ZigZag line, while others would use and extended Fibonacci ratio to set the target. Others would not set a take profit target and instead let price dictate where it wants to go based on candlestick patterns. Another option would be to partially take profit on the swing point and set another take profit target based on the methods mentioned above.
 
<h2>Channel Waves Forex Trend Following Strategy</h2>
Another way to trade on an established trend is by using indicators that have bands or channels. These types of indicators are very useful for most traders, whether trend reversal traders, mean reversal traders or momentum traders.
Trend following strategies are no different. Traders who trade trend following strategies also benefit from these types of indicators. This is because momentum and trend direction could also be observed using these indicators, while also having an average price line being displayed on the chart. This allows traders to easily identify which direction to trade and where to observe price retracements in order to effectively trade on an existing trend.
The Channel Waves Forex Trend Following Strategy provides trade setups based on the direction of the existing trend and entries based on retracements towards the mean.
<h3>Donchian Channels</h3>
The Donchian Channel is a technical indicator developed by Richard Donchian.
This indicator provides information regarding the average price as well as the overbought or oversold price areas.
The overbought line is based on the highest highs for an n period, while the oversold line is based on the lowest lows for an n period. On a ranging market, price would usually stay within the range of these lines without moving the outer lines too often. However, during a trending market, price would usually either be breaking higher highs or lower lows. This causes the outer lines to constantly move higher or lower. This characteristic allows traders to identify trend and momentum based on the outer lines.
The mean price or the middle line is also based on the outer lines. It is basically the mean price of the upper line and the lower line. It could be used as a moving average line would be used. However, unlike a standard moving average line, the midline of a Donchian Channel tends to be more responsive to price movements during a trending market and more stable during a ranging market.
<h3>Fisher Indicator</h3>
The Fisher indicator is an oscillating technical indicator which indicates trend direction using histogram bars. Positive bars indicate a bullish trend while negative bars indicate a bearish trend. Positive bars are also colored lime while negative bars are colored green.
Crossovers from positive to negative or vice versa could be used as a trend reversal signal. However, this should not be used as a standalone signal.
The Fisher indicator tends to be very responsive to price movements. Because of this, the Fisher indicator could indicate a reversal even with a short series of retracement candles. As such, the Fisher indicator works best when trading short-term trends with the objective of getting in and out of a trade early.
<h3>Trading Strategy</h3>
This trading strategy is a trend following strategy based on price retracements towards the median price of the Donchian Channel.
To trade this strategy effectively, trades must be aligned with the general trend. Trend direction will be based on a 50-period Simple Moving Average (SMA). Price and the midline of the Donchian Channel should be located on the correct side of the 50 SMA based on the trend. The 50 SMA should also be sloping to indicate that the market is trending strong enough.
The Donchian Channels’ outer lines should also be constantly moving indicating that either higher highs or lower lows are being formed depending on the direction of the trend.
Price should then retrace towards the midline of the Donchian Channel and temporarily cross over it causing the Fisher indicator to temporarily reverse.
Trades are taken as soon as the Fisher indicator indicates that the trend has resumed, and price has crossed the midline of the Donchian Channel once again towards the direction of the trend.
Indicators:
<ul>
<li>50 SMA</li>
<li>DonchianChannels.ex4</li>
<li>Fisher.ex4</li>
</ul>
Timeframe: 1-hour and 4-hour charts
Currency Pairs: major and minor pairs
Trading Session: Tokyo, London and New York sessions
<h3>Buy Trade Setup</h3>
Entry
<ul>
<li>Price should be above the 50 SMA.</li>
<li>The midline of the Donchian Channel (blue) should be above the 50 SMA.</li>
<li>The 50 SMA should be sloping up indicating a bullish trend.</li>
<li>Price should retrace below the midline of the Donchian Channel.</li>
<li>The Fisher indicator should temporarily print negative red bars during the retracement.</li>
<li>Enter a buy order as soon as the Fisher indicator prints a positive lime bar and price closes above the midline of the Donchian Channel.</li>
</ul>
Stop Loss
<ul>
<li>Set the stop loss below the lower line of the Donchian Channel (green).</li>
</ul>
Exit
<ul>
<li>Close the trade as soon as the Fisher indicator prints a negative red bar.</li>
</ul>
<img class="alignnone size-full wp-image-64114" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Channel-Waves-Forex-Trend-Following-Strategy-1.png" alt="Channel Waves Forex Trend Following Strategy 1" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Channel-Waves-Forex-Trend-Following-Strategy-1.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Channel-Waves-Forex-Trend-Following-Strategy-1-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Channel-Waves-Forex-Trend-Following-Strategy-1-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<img class="alignnone size-full wp-image-64113" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Channel-Waves-Forex-Trend-Following-Strategy-2.png" alt="Channel Waves Forex Trend Following Strategy 2" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Channel-Waves-Forex-Trend-Following-Strategy-2.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Channel-Waves-Forex-Trend-Following-Strategy-2-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Channel-Waves-Forex-Trend-Following-Strategy-2-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<h3>Sell Trade Setup</h3>
Entry
<ul>
<li>Price should be below the 50 SMA.</li>
<li>The midline of the Donchian Channel (blue) should be below the 50 SMA.</li>
<li>The 50 SMA should be sloping down indicating a bearish trend.</li>
<li>Price should retrace above the midline of the Donchian Channel.</li>
<li>The Fisher indicator should temporarily print positive lime bars during the retracement.</li>
<li>Enter a sell order as soon as the Fisher indicator prints a negative red bar and price closes below the midline of the Donchian Channel.</li>
</ul>
Stop Loss
<ul>
<li>Set the stop loss above the upper line of the Donchian Channel (red).</li>
</ul>
Exit
<ul>
<li>Close the trade as soon as the Fisher indicator prints a positive lime bar.</li>
</ul>
<img class="alignnone size-full wp-image-64112" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Channel-Waves-Forex-Trend-Following-Strategy-3.png" alt="Channel Waves Forex Trend Following Strategy 3" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Channel-Waves-Forex-Trend-Following-Strategy-3.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Channel-Waves-Forex-Trend-Following-Strategy-3-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Channel-Waves-Forex-Trend-Following-Strategy-3-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<img class="alignnone size-full wp-image-64111" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Channel-Waves-Forex-Trend-Following-Strategy-4.png" alt="Channel Waves Forex Trend Following Strategy 4" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Channel-Waves-Forex-Trend-Following-Strategy-4.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Channel-Waves-Forex-Trend-Following-Strategy-4-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Channel-Waves-Forex-Trend-Following-Strategy-4-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<h3>Conclusion</h3>
This trend following strategy is a variation of other trend following strategies based on band or channel indicators. Other variations use the Bollinger Bands and trades on bounces off an outer band as price crosses over the midline.
The key to this strategy is in correctly identifying trending markets and trading on retracements and congestions. It is also best to align the trade with the higher timeframe trend as this usually produces better results.
 
<h2>Awesome Bollinger Forex Trend Following Strategy</h2>
Another way to trade effectively during an established trending market is by entering the market as the market starts to push with momentum.
Strong trending markets are usually characterized by cycles of a strong momentum push towards the direction of the trend, a temporary sideways or retracement action, another momentum push, and back again to a sideways or retracement action. This cycle repeats itself again and again until the trend fizzles out.
Trading right before a strong momentum push is a good way to enter the market in a strong trending market condition. This is because momentum confirms that the trend is still ongoing. This allows us as traders to assume that there is a high probability that price would reach a reasonable take profit target. We could also assume that price would not reverse strongly anytime soon.
The Awesome Bollinger Forex Trend Following Strategy confirms trend direction based on reliable trend indicators and provides entry signals based on momentum candles that indicate the beginning of a strong momentum push.
<h3>Awesome Oscillator</h3>
The Awesome Oscillator (AO) is a trend following indicator that helps traders identify trend direction objectively.
This oscillating indicator displays histogram bars to indicate trend direction. The bars are based on the difference between a 5-period and 34-period Simple Moving Average (SMA). However, the moving averages used are not based on the close of the candle. Instead, this indicator uses the median of the high and low of a candle as a basis to compute for the SMA.
Positive histograms indicate bullish trend direction while negative histograms indicate a bearish trend direction. The bars also change colors depending on the whether the current bar has a bigger figure than the previous bar. Bars that have bigger figure than the previous bar are colored green, while bars with a smaller figure than the previous bar are colored red. This would serve as an indication whether the gap between the 5 and 34 SMA is widening or contracting.
<h3>Bollinger Bands</h3>
The Bollinger Bands is another trend following technical indicator developed by John Bollinger in the 1980s. This indicator indicates trend direction, volatility and momentum, providing traders a good perspective of what the market is doing.
This indicator displays three lines – a midline and two outer lines. The midline is basically a moving average, usually a Simple Moving Average (SMA). The outer lines are deviations coming from the midline.
The three components of the Bollinger Bands could provide enough information for traders to use. The midline could be used as a normal moving average would be used. It could indicate trend direction and the strength of the trend based on its slope. The outer lines could provide information regarding volatility, oversold and overbought conditions, and momentum.
During a high volatility market condition typically found on market expansion phases, the outer lines tend to widen increasing the gap between the three lines. On the other hand, during a low volatility condition which is typical in a market contraction phase, the outer lines also tend to contract.
Price touching the outer lines could also mean different things to different traders. Mean reversal traders would identify these as overbought or oversold conditions. Momentum traders on the other hand would consider price closing beyond the lines as indications of momentum. It all depends on the parameters used to set the outer lines and the characteristics of the candles as it touches the outer lines. Price rejection when touching the outer lines could result in a mean reversal, while strong momentum candles going over the outer lines could mean a start of a fresh momentum.
<h3>Trading Strategy</h3>
This strategy confirms trend direction based on the Awesome Oscillator and a 50-period Simple Moving Average (SMA).
Trend direction on the Awesome Oscillator would be based on whether the bars are positive or negative. The bars should also come from a considerable distance from the midline for most parts of the trend. As price starts to contract or pullback towards the mean, it is normal to observe that the bars are getting closer to the midline, however, the bars should not be too close as this may mean that the trend may be ending.
The 50 SMA will be used as a standard trend direction filter. The trend will be based on the location of price in relation to the 50 SMA. During the trending condition, price should not be touching the 50 SMA and should have a considerable distance from it. Trend direction would also be based on the slope of the 50 SMA. A steeper sloping 50 SMA would be good as this indicates a strong trend.
The Bollinger Bands will be used to identify contractions and momentum. This strategy uses two Bollinger Band sets. One will have a standard deviation of 0.5 and another will have a standard deviation of 1. This would allow us to visualize more easily whether the market is contracting or expanding and if price has retraced towards the mean based on the Bollinger Bands. During an expansion phase of a strong trending market, price would typically stay beyond or close to the outer bands. As the market starts to contract, price would typically enter the middle lines of the Bollinger Bands and at times even touch and reject the opposite outer band. Then, as the trend resumes and a momentum candle appears, price would usually close back outside the outer band in the direction of the trend. This signifies the probable start of a fresh momentum push in the direction of the trend.
Indicators:
<ul>
<li>Bollinger Bands
<ul>
<li>Period: 20</li>
<li>Deviations: 0.5</li>
</ul>
</li>
<li>Bollinger Bands
<ul>
<li>Period: 20</li>
<li>Deviations: 0.5</li>
</ul>
</li>
<li>50 SMA</li>
<li>Awesome.ex4 (default settings)</li>
</ul>
Timeframe: 15-minute, 30-minute, 1-hour and 4-hour charts
Currency Pairs: major and minor pairs
Trading Session: Tokyo, London and New York sessions
<h3>Buy Trade Setup</h3>
Entry
<ul>
<li>Price should be above the 50 SMA.</li>
<li>The Bollinger Bands should be above the 50 SMA.</li>
<li>The 50 SMA should be sloping up indicating a bullish trend.</li>
<li>The bars on the Awesome Oscillator should be positive indicating a bullish trend.</li>
<li>As price pulls back, price should be closing inside the Bollinger Band lines.</li>
<li>The Bollinger Bands should also start to contract.</li>
<li>The Awesome Oscillator should stay positive despite the pull back.</li>
<li>Enter a buy order as soon as a momentum candle closes above the top outer line of the Bollinger Bands.</li>
</ul>
Stop Loss
<ul>
<li>Set the stop loss at the fractal below the entry candle.</li>
</ul>
Take Profit
<ul>
<li>Set the take profit target at 2x the risk on the stop loss.</li>
</ul>
<img class="alignnone size-full wp-image-64118" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Awesome-Bollinger-Forex-Trend-Following-Strategy-1.png" alt="Awesome Bollinger Forex Trend Following Strategy 1" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Awesome-Bollinger-Forex-Trend-Following-Strategy-1.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Awesome-Bollinger-Forex-Trend-Following-Strategy-1-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Awesome-Bollinger-Forex-Trend-Following-Strategy-1-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<img class="alignnone size-full wp-image-64117" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Awesome-Bollinger-Forex-Trend-Following-Strategy-2.png" alt="Awesome Bollinger Forex Trend Following Strategy 2" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Awesome-Bollinger-Forex-Trend-Following-Strategy-2.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Awesome-Bollinger-Forex-Trend-Following-Strategy-2-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Awesome-Bollinger-Forex-Trend-Following-Strategy-2-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<h3>Sell Trade Setup</h3>
Entry
<ul>
<li>Price should be below the 50 SMA.</li>
<li>The Bollinger Bands should be below the 50 SMA.</li>
<li>The 50 SMA should be sloping down indicating a bearish trend.</li>
<li>The bars on the Awesome Oscillator should be negative indicating a bearish trend.</li>
<li>As price pulls back, price should be closing inside the Bollinger Band lines.</li>
<li>The Bollinger Bands should also start to contract.</li>
<li>The Awesome Oscillator should stay negative despite the pull back.</li>
<li>Enter a sell order as soon as a momentum candle closes below the bottom outer line of the Bollinger Bands.</li>
</ul>
Stop Loss
<ul>
<li>Set the stop loss at the fractal above the entry candle.</li>
</ul>
Take Profit
<ul>
<li>Set the take profit target at 2x the risk on the stop loss.</li>
</ul>
<img class="alignnone size-full wp-image-64116" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Awesome-Bollinger-Forex-Trend-Following-Strategy-3.png" alt="Awesome Bollinger Forex Trend Following Strategy 3" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Awesome-Bollinger-Forex-Trend-Following-Strategy-3.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Awesome-Bollinger-Forex-Trend-Following-Strategy-3-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Awesome-Bollinger-Forex-Trend-Following-Strategy-3-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<img class="alignnone size-full wp-image-64115" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Awesome-Bollinger-Forex-Trend-Following-Strategy-4.png" alt="Awesome Bollinger Forex Trend Following Strategy 4" width="936" height="598" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Awesome-Bollinger-Forex-Trend-Following-Strategy-4.png 936w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Awesome-Bollinger-Forex-Trend-Following-Strategy-4-300×192.png 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2020/07/Awesome-Bollinger-Forex-Trend-Following-Strategy-4-768×491.png 768w" sizes="(max-width: 936px) 100vw, 936px" />
<h3>Conclusion</h3>
This strategy works very well on an established trend that is trending strongly. It is based on momentum pushes that are gauged using the Bollinger Bands.
The key to successfully using this strategy is by applying it on a strong trending market. This is characterized by a steep sloping moving average.
It is also important to note that momentum tends to fizzle out as the trend is prolonged. Trends could have multiple pullbacks, however trading on later pullbacks tend to have lower probability.
<h2>Final Words</h2>
These trading strategies are tools that you could use to profit from the market. It helps you identify trading opportunities which you would have otherwise overlooked. However, none of these are Holy Grails of trading. In fact, there is no Holy Grail in trading. Trading is about probabilities and observations of market behaviors.
The key to trading is in correctly identifying the market’s behavior for the moment. As soon as you could identify these behaviors, then you could apply the correct strategy.
<h2>Forex Strategies Download</h2>
<a href="https://www.forexmt4indicators.com/go/xm/" target="_blank" rel="noopener noreferrer"><img class="alignnone size-full wp-image-26048" src="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2016/08/xm-no-deposit-bonus.jpg" alt="xm-no-deposit-bonus" width="500" height="248" srcset="https://forexmt4indicators.b-cdn.net/wp-content/uploads/2016/08/xm-no-deposit-bonus.jpg 500w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2016/08/xm-no-deposit-bonus-300×149.jpg 300w, https://forexmt4indicators.b-cdn.net/wp-content/uploads/2016/08/xm-no-deposit-bonus-370×184.jpg 370w" sizes="(max-width: 500px) 100vw, 500px" /></a>
<h3>Forex Strategies Installation Guide</h3>
<ul>
<li>
<ul>
<li>Download the Zip File</li>
<li>Copy mq4 and ex4 files to your Metatrader Directory / experts / indicators /</li>
<li>Copy tpl file (Template) to your Metatrader Directory / templates /</li>
<li>Start or restart your Metatrader Client</li>
<li>Select Chart and Timeframe where you want to test your forex system</li>
<li>Right click on your trading chart and hover on “Template”</li>
<li>You will see Setup is available on your Chart</li>
</ul>
</li>
</ul>
<h4>Click here below to download:</h4>
 

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Top 5 Best Forex Trend Following Strategies That Work

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