Primary and Secondary Trend in Forex

What are Primary and Secondary trends?

Primary and secondary trends in forex refer to the impulsive and corrective (pullback/retracement) moves of market price respectively. This means that the primary trend in “your analysis” is the direction that price is going on in the larger timeframe that you are using. the secondary trend is the trend that is opposite to that of the primary trend and is the shorter movement among the two.

As explained in chapter 7: Market Structure the retracement of price on a larger timeframe could be a change in trend on the smaller timeframe.

For example, the D1 retracement looks like a complete price reversal on the H4, H1, M15, and M5 timeframe. The smaller the timeframe, the more convincing it looks as if price had reversed because of the structures being broken and retested.

Primary and Secondary trend in forex
Primary and Secondary trend

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How to identify primary and secondary trends in forex?

Notice in the above definition, “This means that the primary trend in “your analysis” is the direction that price is going on in the larger timeframe that you are using”, ‘your analysis’ is within quotation marks. This is yet another proof of evidence that trading forex is subjective to the trader.

To be more precise, identifying primary and secondary trends in forex is done by using two timeframes of choice. (example D1 and H1)

The direction of the larger timeframe is the primary trend, and while the trend on the smaller timeframe is the secondary trend.

How to trade primary and secondary trends in forex?

It is highly recommended that you use the D1 as your primary trend while using the H4 as your secondary trend. This means that when the H4 is in a downtrend, and the D1 is in an uptrend, a trader may use a 1:2 risk-reward ratio.

However, if the H4 and D1 are in unison (going in the same direction), then a trader may apply a 1: 3, 4, or 5 (maybe even higher if he wants) risk reward ratio.

This is because when the D1 is trending, it lasts for months. But the bigger the take profit, the more patience is needed.

It is a heartbreaking experience that could have a serious dent in your mental fortitude required to maintain discipline character if a trade(s) running in profit for days reversed and hit your stop loss. As a result, a trader should ensure to protect his/ her profit by breakeven the running trades that are in profit.

H4 timeframe Day trading strategy

To trade the H4 downtrend, while the D1 is in an uptrend, wait for the break and retest of the previous lower high from that point to the area that is at least 50 pips above the D1 previous higher high is, you may enter sell positions.

It is risky to have your take profit below that of the D1 support because the D1 is still in an uptrend. So at this point, it would be best to manage your running trades accordingly:

  1. Breakeven all your running trades
  2. Close half of the profits
  3. Close all open positions

How to increase your forex trading consistency Using primary and secondary trend in forex

It is best to avoid trading against the D1 timeframe, in fact following the D1 timeframe increases your consistency by at least 10% given that you apply all the lessons taught and explained through this online forex trading course for beginners.

This means that if the primary trend (D1) is in an uptrend, you would ignore all sell signals until the previous lower high on the D1 timeframe was broken and retested.

Primary and Secondary trend in forex
Previous higher low broken and retested

More information about primary and secondary trend in the form of Dow Theory is explained in greater detail at profitf.com

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