Forex Trend Trading
To be consistantly profitable in Forex, you should be able to identify market trends.
Why do you need to know about trends in Forex? The answer is simple: when you know the trend direction you can increase your chances to make profit from a market move by opening a
position in the direction of the trend. Counter trend traders can be often punished by the Forex market.
So how do we spot a trend? Any new trader should be able to see simple slopes and hills on the chart created by the market price, a trained trader is able to see certain chart patterns.
When the market moves it does so in a certain way, creating a pattern in a set of waves.
The price makes peaks and valleys, or they are also called Tops and Bottoms.
Higher tops and higher bottoms will tell a Forex trader that uptrend is in place.
On the contrary, lower tops and lower bottoms suggest a downtrend.
A good clean trend in a well trending market is one of the favorite trading environments for all Forex traders to trade in.
If you ask an experienced trader how he plans his trading session, the answer will be: "I open my charts and the first thing I want to know is Where the trend is going".
That is right, the examination of the market trends is what every analyst do daily.
How to spot a trend?
There are many simple ways to spot a trend:
1. Visual, where you zoom out the charts till you can see price direction clearly. Zoom in and the market noise is back.
2. By using indicators. For example, 200 SMA. If the market is trading above 200 SMA that is a bullish market, everything below 200 SMA indicates bearish trend.
3. By using other trend following indicators.
4. Or by drawing trend lines: Simpy connect lower lows on your chart till you have a good visible trend line. Then do the same for higher highs.
What you will get will be either a channel Up or a channel Down. Now it is easy to tell which direction the price is heading.
Risk Disclosure: FX Trading Online will not accept any liability for loss or damage as a result of reliance on the information contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets. Currency trading on margin involves high risk and is not suitable for all investors. Before deciding to trade foreign exchange or any other financial instrument you should carefully consider your investment objectives, level of experience, and risk appetite.