Every type of trading strategy works in a trend...

Every type of trading strategy works in a trend...

There, I said it.

As retail traders, we can get lost in researching every possible strategy without realising what a strategy is.

I spent years testing and trying all different trading strategies, I tried just candlestick patterns, I tried all sorts of trading indicators, I tried breakout strategies and many more...

Side note: the daily engulfing candle is one of the best performing candlestick patterns.

Now I don't regret the time I spent testing these strategies because it gave me valuable time studying the markets and how they move.

But at the time I was surprised to find that none of the strategies mattered unless they were used in a trending environment.

Think about it, when we look at the charts and see a trend we all wish we traded it, especially the ones that last for weeks and months. So it's important to understand when and why a trend could form over the strategy you use.

Let me explain.

To me, a strategy is something a trader uses to enter the market consistently. It is something that we can measure and review after a trade has played out.

But the thing is, strategies only work in the RIGHT market environment.

To prove this to you, look at a trending market. You will see that every type of trade will work. A breakout, a pullback to a Fibonacci level entry, an overbought or oversold condition. Any strategy works in a trending environment.

However, if the conditions of the market turn into a range, then the trending strategies will no longer work. No matter how much you force the issue.

That's why it is so important to identify the right conditions for your trading strategy.

My trading method consists of three phases.

1. Why: financial markets move for different reasons, it can be down to macro trends, monetary policy changes, political policies or even major disasters. For instance, when Russia invaded Ukraine, Gold prices initially sold off before racing to new all-time highs.

2. Conditions: What do the charts and the price show us? If I want to buy Gold but the market is in a downward trend, then the conditions do not match the overall bias of the market, so buying wouldn't necessarily make sense to me.

3. Strategy: I only apply a trading strategy, which is a simple multi-time frame analysis approach, when I have the WHY a market could move, and the CONDITIONS to match. This helps me not only enter the market but apply appropriate risk too.

Have you ever traded with an expert advisor or EA?

Well an expert advisor is just an automated trading system. You plug it into your trading software and when the strategy criteria is met, the software buys and sells markets for you. It takes out a lot of the discretion and guess work out of your hands.

But you often hear horror stories that the EA or algo has 'stopped working' or a trader was doing well and all of sudden they have lost most of their original capital.

It's because the same rule applies to EA's as it does to us, manual traders. If the conditions are not right, then our strategy doesn't work.

The best way to approach this is by almost using a hybrid approach. Now I don't do this myself, but it is something I have considered doing for some time.

Get an EA that trend follows, but manually switch it on when a market is in the right conditions, and switch it off when those conditions are no longer there.

Please remember the key message here is, WHY a forex pair or commodity, or stock moves. That's what gives you the edge and the strategy gives you something to measure from.

I have been the guy that strategy hops trying to find the holy grail of trading, the one that never loses. But the reality is, it does not exist. I haven't met a single person that has never lost in the market.

It's more important to trade in line with your personality, but that's a story I have already spoken about, which can be found here.

So, the next time you open YouTube and see a a young adult stating they made x amount of thousands in 3 days, passing props left right and centre. Do me a favour, watch something else instead.

Study what makes markets move, figure out a way to enter the market consistently and just trade in line with that.

I can't promise you anything, but what I can say is, from experience it helps.