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topeman
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Dow theory is primarily used by stock market traders but its principles can help forex trader understand how the market moves and help them identify a trending market thus giving them the chance to enter into more profitable trades.
So what can you learn from the Dow Theory that can be immediately applied to forex.
One of the most prominent theories of Dow is his belief that there are three individual types of trends.
1. The Primary trend
2. The Secondary trend
3. The Minor Trend
The Primary trend is the long term trend and is one of the most underutilized trends that forex traders use. Why? Because most of these traders are concerned with the here and now and therefore trade using 5,10, or 15 minute time frames. However, one of the most frustrating things a trader can deal with is identifying a trend only to watch it whip saw back to its original place. The Primary Trend actually is the overall trend and can last for years. All forex traders should know what the general direction of the currency pair is moving before jumping in on trades, even they are intra-day.
The Secondary trend can last anywhere between a few weeks to a few months and this trend is normally seen as a series of rallies and sell-offs.
Finally, the minor trend is exactly what it sounds and is primarily what beginner forex traders seem to want to use. These trends can counter the primary trend but will most likely correct itself. Many newbie traders use these trends to pick a few pips here and there in intra day trading.
So, how do you define a trend?,
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