What Are the Most Trending Currency Pairs?
Following the trends is the best way to make profit and those who are patient enough to stay with trends are usually profitable trader, of course if they know how to limit their risks properly.
Those who are interested in following the trends usually ask about the most trending currency pairs. Probably they mean the currency pairs that form trends, either uptrend or downtrend, more than the other pairs. But let’s say there are a few currency pairs that trend more than the others. Does it mean that we have to choose those pairs, wait for them to form trends and then we get in and follow the trends?
Probably that makes sense more for those who trade the shorter time frames like one hour. But those who follow the long time frames, like daily, weekly and monthly, can easily choose several currency pairs, check them once every day and then get in when a trade setup which can be the beginning of a trend, forms.
Choosing a trending currency pair and then waiting for it to form a trend on the shorter time frames looks like a good idea to make big profit, but it is not as easy as most traders think. The trade setups that form on the shorter time frames are usually tricky. Shorter time frames form too many false trade setups compared to the longer time frames. Even when traders use delayed and slow indicators like 50 or 200 moving averages, or MACD, they have a hard time to locate a trade setup that really works and the price moves accordingly after it.
Instead of choosing one or a few trending currency pairs and waiting for them to form trends on the short time frames, we can follow too many currency pairs, take the strong trade setups they form on the long time frames, and the enter the market and maximizing the profit. This can be ended to following the too strong trends that some currency pairs form sometimes.
I admit that there are some currency pairs that form stronger, longer and more stable trends compared to the other currency pairs, but the trends they form are mainly trade-able on the long time frames.
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What Is a Trending Market?
Before I show you some examples, please let me have a short short introduction about trend.
There are two kinds of trends: Uptrend and Downtrend
Uptrend
Uptrends form when price goes up and forms higher lows. So this is an uptrend:
You may ask why we don’t say we have an uptrend when price goes up and forms higher highs. As you can see on the above example, there are “lower highs” in an uptrend also, but the strength of an uptrend is in forming lows that are higher than the previous lows. It means when the price goes down and forms a low, it has to be higher than the previous low.
Downtrend
Downtrends form when price goes down and forms lower highs. So this is a downtrend:
Is that easy to distinguish a trending market?
Unfortunately not. Sometimes the price behaves strangely, even on the longer time frames. Therefore, traders have always tried to create and use some tools or indicators to become able to distinguish and locate the trends easier. Moving Averages are the most famous indicators that have been used by traders to locate the trends for several decades. Among all moving averages, the 50 Simple Moving Average or 50SMA is more common among traders.
There is a simple formula to use this indicator:
- We have an uptrend when the price is moving above 50SMA.
- We have a downtrend when the price is moving below 50SMA.
The other indicator which is also a moving average but with different settings, is 20SMA which is in fact the Bollinger Middle Band.
Let’s add these two moving averages to some charts and see whether they help us to determine the most trending currency pairs or not. And if they do, can they also help us trade the trends?
USD/CAD is the most famous trending currency pair. So let’s start from this currency pair.
As you see, although USD/CAD has formed several uptrends that each of them have higher lows, some of them are weak and the price has crossed the 20SMA and 50SMA several times when these weak trends were forming (the red moving average is 20 and the blue one is 50).
The question is how could we know that a trend was forming and we could enter the market on time to follow the trend?
If you use the moving average indicators, then you have to wait for the price to take a special direction strongly first. For example, it has to go up and move above the 20SMA and 50SMA. Then, if it goes down to retest the moving averages and goes up, that is the right time to enter the market to follow the uptrend.
This technique works theoretically, but in reality you will lose in so many trades to find a trend finally, because when the price goes down to retest the moving averages, you never know that whether it will go up again to continue the uptrend it had started, or it will go sideways and keeps on crossing the moving averages. If you check the above screenshot, you can locate several cases that the price has hit the moving averages, but has not moved up strongly after that. This happens a lot when the uptrend is not strong, or when the price wants to form a small downtrend, and then follows the uptrend.
One way to enter the market earlier and without having to wait for the price to take a direction and then hit the moving averages is that we follow the support/resistance breakouts. A support/resistance line breakout forms usually much sooner than the price strong movement above/below the moving averages. Refer to USD/CAD daily chart and see how many resistance breakouts formed before the price goes up strongly to follow the trend. The price didn’t move strongly after the breakouts like #3 and #4 on the below chart, but you could still get out at breakout if you would move your stop loss to breakeven on time:
I am not going to talk about the trading systems to follow the trends here, because we have already talked about them a lot. What I am trying to say here is that even if there are some currency pairs that trend more than the others, it is not that easy to follow the trend they form, unless you already master a trading system like technical analysis or candlestick patterns.
AUD/USD is another currency pair which is very famous in forming the long, strong and continued trends, sometimes even stronger than USD/CAD:
As you see on the above screenshot, there are several strong down movements on AUD/USD daily chart, but here you should also know how to enter the market at the right place and right time to follow the strong downtrends.
GBP/JPY is also a strong trending currency pair, but sometimes even when there is a trend (higher lows or lower highs) still it is impossible to enter the market and follow the trend easily. You will admit what I say if you see the below screenshot. There is a downtrend at the left, and an uptrend at the right.
What we have at the left is still called a downtrend, but it looks impossible to trade using the moving averages, or even technical analysis. Some parts of the right side uptrend are trade-able but there are some choppy areas and sideways movements at the middle of uptrend.
Trading the trends is not a myth, but is not that easy either.
USD/JPY has been trending up during the past a few years. There were some good chances to follow the upward movements:
USD/JPY trends on the weekly chart:
In general, mastering a trading system and using it to locate the too strong trade setups on the long time frames is the best way of follow the trends. Those who try to hit the bottom or top of the markets, usually lose a lot sometimes. Among these traders, are those who try to follow the most trending currency pairs on the shorter time frames.
Traders have to know that it is not possible to catch all the movements and strong trends, because we never know what trade setup ends to a strong trend. All we can do is that we take the strong trade setups, set a reasonable and proper stop loss and move it to breakeven at the right time. If the trade setup we take ends to the formation of a trend, then good.
Hi Chris,
Is it possible that there’s a strong bearish trend on daily timeframe, but a strong continuation bearish setup (candle) formed on a BB that’s pointing up? In that case, will it be a 100 setup? Thank you
Maria,
Please share the screenshot.
Thank you Chris, again a very well written, easy to understand, article.
Someone else maybe has already told you about the following sentence “uptrend”.
“when price goes down and forms lower highs. So this is an uptrend:”
Thank you TJ.
Thanks for the article Chris!
awosome article once again,,,,,,,,,thanks chris sir.
Hi Chris, you are always right.
I have experienced how difficult and risky is to trade the trending currency. Especially if you have not
Experience.
For this reason now I do only trade with the strategy I learned from LuckScout, based on BB+ strong set up pattner candlestick D1-W1-Monthly time frame.
I understand those who are already experts who want to take every possible
opportunities for profitable trade. For me it is premature.
However, even this is a great lesson made with clarity on semplicity
which I will return ‘later.
Thank you.
I would say an uptrend will have higher lows, and higher highs, Correct? And Chris you are right on, it is not easy to pick out the trends on lower time frames, total different picture. Great article as always.
Dary,
It has to have higher lows to be an uptrend, but at the same time it can have lower highs. See the examples in the above article.
Hi Chris. Thanks for another great article. I want to ask about this “All we can do is that we take the strong trade setups, set a reasonable and proper stop loss and move it to breakeven at the right time.”
When it the right time to move a stop loss to breakeven? I know that we say to do it when we hit TPx5 or whatever, but I wonder if the setup is not a too strong 100 score then moving up sooner is wiser? I have had trades with a target of TPx5 hit the TPx3 level and then reverse to hit the stop loss.
Thanks
Jae,
There is no exact answer to this question. There are a lot of signals that you can use to move the SL to breakeven. For example you do it when the price reaches the very first support/resistance level.
OK thanks Chris, I guess this is one area where experience really matters.
Thanks i am learning day by day Thanks Sir
Thank you so much Chris
Many traders expect to enter at the start of a trend and exit at the very last candle. But I think if we are truly professional to take even two third of a trend that is a huge success for us.
I hope we could grow our account to a reasonable balance soon with your help to savor the peace of mind of longer timefrmes
Hi Chris I think one has to have nerve of steel to follow a long term trend, because at the first retracement or correction I will get out
Nicolaas,
It will develop in you step by step. One day you will see yourself a patient swing trader.
Hi Nicolaas,
I have the same problem :). That is why now I am trying another approach – “set it and forget it”.May be the success rate would be a little bit lower,but trading stress free is really worth this.
Hi Chris.I like trend fallowing strategy splashily stay above or billow 50 MA on Daily or 4 hr time frame, but i don’t have confidence to stay that long, how can i combayn with fundamentals to build a confidens
Hi Chris,thanks for this educative analysis.
Fact is that only when we feel emotional pain and dissapointment from losing trades we start to pay attention to strong trade setups how strong they are and it is worth to enter on trade.
Many off us enter on market becaouse they think that this will work out insteead to listen the Market what is got to say.
When couple weak trade setups doing well and we make profit we start to feel confident and our mind get blur and we can’t see basic weak points and reasons to not enter on Market and avoid new trade setup, thinking this one will work like one before.
We are lucky becaouse we have each other,we have chance to learn together, to educate ourselfs and support each other and having you Chris as our mentor and LuckScout team
is most precious thing we ever need to become consistantly profitable trader.
Good Luck to All and take only too strong trade setups. 🙂
Chris,
thanks again for the great article.
One question to you Sir.
From your examples, I see that I have to wait for several days, weeks even months to catch a good trend. I am new just started trading 5 months back, I am sure I would have missed many strong up/down trends, setups and still I may miss many more in future.
How can I enter/exit at right time and right place without missing one?
Thanks,
Prakash.R
Prakash,
You are welcome.
We all miss some of the setups. That is normal. However, the ones we succeed to take are enough for us to make the profit we want. There are always enough number of setups even on the long time frames.
The way we are following the markets is a good and effective way to take most of the strong movements. We wait for the too strong candlestick patterns, as well as support/resistance levels breakouts or tests, technical analysis and… . I don’t think there is anything more we can do.
Don’t worry and think about the number of setups you succeed to take, and the amount of profit you can make. Just focus on locating the strong setups. The profit will be made by itself. Think about profit and the number of setups doesn’t allow us to follow the right track we are following. It makes us to look for more ways to trade, and this will end to nothing but loss.
Good luck 🙂
Chris,
Thanks a lot. I do not have words to express my gratitude for the Trading knowledge you teach me. Especially from the articles on “Stochastic Oscillator” and this “20SMA/50SMA” strategies, I got back my confidence and motivation.
I have analyzed and did a manual back test on weekly TF for all the major currency pairs for the past 5 months. I do see that I have missed all the +500 pips trade setups shown by these indicators, esp. 20/50SMA.
I am confident that I will definitely take such trade setups in next 5 months and follow strict weekly TF. No more looking my mobile trading platforms, which tends to react to my emotions 🙂
Based on 20/50SMA, I took Long on GBPUSD at 1.5500 this Monday. It was going very good with 200+ pips. :). Also I went Short on NZDCAD. It is doing good.
Once again thank you Chris.
Thanks,
Prakash.R
Prakash,
Glad to hear that.
I wish you all the best 🙂
Hi Chris, thanks for all you do. Your articles are really spot on :). I would love to trade trends and be in for the long run 🙂 and still working on the best way to get the best signals and filter false starts and continuation, It’s tricky to start with the trend. You are right that we get stopped out a lot but will surely get there. I just feel for me trend is easier because one good trend can keep me in and cover several trades.
Please what is the best setting for stochastic as it isn’t stated in the main article for the indicator. Someone also asked a while ago but can’t find the week 🙂
Thanks again And have a good weekend 🙂
Shalewa,
Thank you too.
Stochastic default setting is 14 periods. However traders usually use 14 periods that doesn’t make a big difference.
A good article on stochastic indicator is here:
https://www.luckscout.com/stochastic-oscillator-a-mechanical-indicator-for- -trading/
Good article. As per your explanation, took the GBPUSD as it formed above low mbb and sat nIcely on 50MVA on June 6th an uptrend continuation and with a higher low. However, exited in panick 2days ago when it reversed, long lower shaddow but also took a but limit for a good price after convincing myself that the upward signal was valid.
Still lots to learn on Demo.
Thanks chris.This is a very usefull article.I think 50sma is another indicator in should add to my chart to use in hand with bb.
Stephen,
More details here:
https://www.luckscout.com/follow-the-trends-with-50-day-moving-average-and-locate-the-strong-trade-setups/
https://www.luckscout.com/200-day-moving-average-and-its-use-in- -trading/
Excellent article. Thanks Chris
Thank you Chris for the thorough and insightful teachings in this article; I learned a lot!
thank u chris
Great article again, always take away some useful information from your articles.. can’t wait to be able to use them like a professional. It will happen soon.
Chris:
Assuming there would be two strong setups occurring simultaneously, but, for…. whatever reason, a Trader is limited to taking only a single position. In such an instance and in considering which pair to trade, is there a way to determine, or estimate “best bang for the buck”? Perhaps the spot value of individual currencies of a pair, SSI, recent % movement change of the pair, etc., something? Anything?
I will appreciate your reply Sir. Thank You!
Jeng,
I take the one that has formed a stronger setup. If the setups look the same (although you can never find two same setups), I consider the other things like Swap, liquidity, pip value and…
This is one of your best articles to date… Thanks Chris
Thank You Chris for your dedication and mentorship.
Happy Trading!
Great article thanks mentor Chris.
Hi Chris,
Thanks for your nice article that makes me clear for a trend finding. Actually my trading life completely changed by reading and following your articles. As a result my account is growing gradually after finding LuckScout. I am very much liable to you. Wishing a long live Chris, LuckScout & the team.
Thanks again.
Azhar,
Thank you. I am glad to hear you are doing good. Keep on following the same right track. Keep in mind:
Hi Chris
Thank you for sharing your knowledge with us.
I am very new to this game.
Although I would love to trade long time trade but I feel that I have to start with shorter time frame and build on that.
Can you apply 50SMA and 20SMA on a smaller time frame like 4H or 1H?
Many thanks for your help
Danuta,
You can back-test and see if it works on those time frames.
my dear Chris the best strategy i am using now is ,
apply the fibonacci on the daily time frame based on ABCD(by jerad martinez),apply BB,wait for the retracement to form with strong BB brake out,or price being supported by 50 sma then enter the trade.
i love it.(i am not familiar how to use the system to show a screenshot).but i’ll do my best to show screenshot. thanks chris for showing me (BB BRAKE OUT STRATEGY)
my results is improving day after day.love you man.
Awesome Chris,
Thanks!
I agree, trend trading is easier said than done but with patience and discipline it is doable. The good news is that all the necessary tools to do that are all here on LuckScout
Hi Chris, why is date and time removed from article title headers and replys to comments
Oluwayemisi,
They are removed for some technical reasons. Still they are sorted based on date on the archive page:
https://www.luckscout.com/archive/
Very valuable article indeed. Thank you. I can appreciate how skillful we need to be to follow the trends and breakouts, do it in a right time as well and come out with the profit not loss. I think the more you trade, the more aware you become of unpredictability of the market. That teaches you patience and acceptance of what is.
I can see more clearly now, why You take only the strongest setups and skip the weaker ones…
Its about minimizing the risk which seems to be huge on such volatile and wild market.
Its funny, that One need to experience those things to really start to see the risk involved. I am slowly getting to that stage to understand that all the hassle of trying to pick up some blurry setups is not worth it in a long run. It costs too much nerves and its bound to make you disappointed! I reckon, that when we stop taking anything which only looks promising but its really not, and start taking only the strongest looking setups, we develop some sharpness in our mind and then we are able to Separate The Wheat From The Chaff 🙂 This, in turn would make us profitable traders in the end.
Thank you Marek 🙂
Great mentorship Chris.
Am slowly coming to grips with your advise.
I always looked at the higher highs, when it comes to check if I have an uptrend. But I think it’s the same thing. Thank you for this great article. You always help us so much 🙂
Thank you Chris, your posts are always appreciated.
Thanks, Chris.
Expanding my knowledge.
Hi Chris.I like trend fallowing strategy splashily stay above or billow 50 MA on Daily or 4 hr time frame, but i don’t have confidence to stay that long, how can i combayn with fundamentals to build a confidens
Arayik,
Fundamentals support your position only when you are in based on a too strong trade setup on a long time frame:
https://www.luckscout.com/important-economic-news-are-usually-agreeable-with-long-time-frames/
You can stay longer with a trend, if you enter based on a shorter time frame, and stay in based on a long time frame. For example you get in based on a too strong trade setup on the daily chart, but you stay in based on the weekly and monthly time frame.
Thanks
I gather that the “trend can be our friend”
Never tried swing trading though. it looks like a lot of work.
Very good article!
Thank you for giving us the opportunity to learn something new every day!
I’ve traded using 20 & 50 SMA before in shorter timeframes, it definitely doesn’t work, most of the time you’ll only be faced by a dilemma of having to choose between waiting for a retest / to enter now.
Mentor Chris, Thanks for this awesome, enlightening, educative article, as usual. I used to fall in love with small time-frames, especially 5 minutes; and I’ve made several bad trades in my demo.
But over time I’ve learnt that it’s more profitable to trade with long time frame, like daily chart. I know better now. I’m now trading profitably in my demo.
Please keep up the good work. God bless you really good.