The trend trading method is a very efficient way to earn money. The majority of retail traders can make a consistent profit since they always stick to the major trend. There are two major types of a trend in the market. When the market rallies higher, it is said to be in upend and when it goes down, it is said to be in a downtrend. Today, we are going to discuss the bearish trend trading strategy. If you can follow the rules of this article, you can start making a decent profit by trading the bearish trend.
Table of Contents
Drawing the bearish trend line
Before you start thinking about executing a short order, you need to know how to draw the bearish trend line. To draw the bearish trend line, you need to connect three higher lows in the market. But make sure you are not connecting the higher lows in the lower time frame. If you do so, you are going to trade the minor trend in the market. Unless you learn to find the bearish trend line in the daily or weekly time frame, you are not trading in favour of the long term trend. So, the selection of the time frame while drawing the major trend line is crucial to your success.
Rejection of the bearish trend line
Naïve traders in the Forex trading industry often set pending sell orders at the critical resistance level. In contrast, the elite traders at Saxo wait for the price action confirmation signals. By using the price action confirmation signals, you can easily improve your trade execution process. Most importantly, you will be able to use tight stops. Most of the trend traders thinking using the tight spotless is nearly impossible at trading. But this is not all true. Learn to deal with the Japanese candlestick and it won’t take much time to establish your skills as a trend trader. Instead of learning about the complicated price action signals, focus on the major bearish price pattern.
Demo trade the bearish trend line
Those who don’t have the confidence to trade the bearish trend line should use the demo trading account. This demo trading account gives you premium access to the retail trading industry and you can easily learn to trade this market with discipline. Most importantly, you won’t have to think about losing trades. The outcome of any trade will have zero impact on your trade execution process. You get the unique chance to make a decent profit without worrying about your real investment. So, try to learn the bearish trend line trading strategy by using the demo account.
Analyze the major news
Analyzing the news is one of the most critical aspects of trading. Those who are trading with the trend should learn about the news trading process. Let’s say, you are going to trade the AUDUSD pair. During the New York trading session, NFP data showed significant strength in the U.S economy. So, it’s obvious that the AUDUSD pair will sharply drop in the global market. Most of the time, it’s impossible for naïve traders to find such a sharp drop in the price. But when the price trades near the critical trend line resistance, you should look for such high impact news. The news act as the price driving catalyst and this can result in big profit.
Be prepare to lose trade
You need to be prepared to lose trades regularly. If you think you can win all the trades you are making a big mistake. Making money in the Forex market is all about dealing with the losing trades. Once you learn to play safe and trade this market with discipline, trading the bearish trend line is not going to be a tough task. Have confidence in your skill and never try to rush in this market. Stick to the demo environment until you can make consistent profit by trading the bearish trend line.