Why Does Trend-Following Forex Trading Still Fail?

In forex trading, everyone knows to "follow the trend," yet many traders still fail despite adhering to this principle, leaving them confused. Below, we explain why trend-following strategies can fail in forex trading.

Why does trend-following forex trading sometimes fail? The reasons boil down to the following points:

1. Unclear Understanding of the Trend
   Many traders analyze superficially, assuming that simply observing whether the trend is rising or falling on a chart means they're following the trend. However, proper analysis requires more than just identifying the current trend—it involves studying past movements to predict future ones.

2. Poor Entry Points
   For risk-reward traders, even if the trend and direction are correctly identified, entering the market below the midpoint can lead to failure despite following the trend. Thus, merely following the trend isn't enough—entry timing is equally crucial.

3. Overtrading
   Forex spreads fluctuate constantly. If price movements are too small, the midpoint is too close to the edges, making it unlikely for trades to stay above the midpoint. In such cases, frequent trading—even if trend-following—can fail due to spread costs.
   
   

In forex trading, maintaining a solid investment mindset is essential. Profits and losses are normal, and traders shouldn’t lose confidence just because a trend-following trade didn’t yield gains. While trading against the trend is almost certain to fail, following it doesn’t guarantee success. For more forex insights, check out our beginner’s guide.