Trend traders are one of the biggest groups of traders participating in the forex market. The trend itself is a concept which nearly all traders use in their trading strategy. What I want to spend some time looking at today, is the reason why trend traders overall lose money when trading the forex market.
First I’ll explain my definition of what a trend trader is, then I’ll show you where trend traders typically decide to enter their trades and then finally I’ll show you why they lose money with a simple example to better explain the points.
My Definition Of A Trend Trader
First I think it’s best if I give you my definition of a trend trader because what I call a trend trader and what other people call a trend traders are likely to be slightly different.
When most people say there a trend trader they mean they trade in the direction of the predominate trend in the market. The predominate trend is the direction the market has been moving in for the longest amount of time. My definition of a trend trader is similar to what I’ve said above but not quite the same, to me a trend trader is someone who uses a strategy to enter the market after the price has already moved.
The aim of the trend trader is to capture a continuation of a movement in the market as trend traders believe in the concept of trend which is ( if the price has moved in the same direction for a reasonable amount of time its likely to continue moving in the same direction in the future )
Therefore the trading strategy used by a trend trader will be geared towards exploiting this assumption made about the market. Trend traders wont be trying to predict when a reversal is going to occur because they believe once