Reading forex trends is a very important Forex technical analysis tools, which traders should use when trading currencies. Trend trading lines are lines drawn on a Forex chart to indicate an uptrend or downtrend. The use of trend trading is to determine the relative direction of prices in a market. Trend trading is when you only take trades that are in a trend.
Trends are defined as uptrends, downtrends or flat. Without a trend, prices will remain flat and unchanged. For trend trading to be profitable, movements in price must happen. The phrase “the trend is your friend” means that trades taken with the trend are lower risk. If everyone else is buying at the moment why do you want to sell!
The opposite approach could be used for a market in a downtrend. The downtrend is identified when the pair has been building lower highs and lower lows. By trend trading in the direction of the dominant Forex trends, you will have market momentum behind them. This helps to reduce risk of any open trading positions as you have the ‘backing’ of the market.
While it is of course possible to identify trades against the trend, any profits earned in this way will come with a much greater level of risk attached to the trade. This is because you are effectively buying against the general direction of the market or in other words gambling! Trend trading over time is lower risk and less stressful.
Trends can last for weeks, months or even years. A longer term monthly trend may contain several shorter term daily or weekly trends within it. As with Support and Resistance, a general rule is the longer the time frame the stronger the trend.
When I first started to trade Forex I started on the 15 minute charts where I consistently made losses. I started to make money when I moved to the longer time frames of 4 hours, daily, or even weekly charts. I recommend to anyone new to the Forex field to concentrate on the longer time frames as it is generally less stressful, and there is no need to sit at your computer the whole day.
This article covers the basics of trend trading, forex trends and how to analyse those trends. I cover this in much greater detail on my training course forexmentorpro where I go into great detail showing you live examples of trades via my daily analysis videos. Get your seven day trial of forexmentorpro for $1 here,
Trends are defined as uptrends, downtrends or flat. Without a trend, prices will remain flat and unchanged. For trend trading to be profitable, movements in price must happen. The phrase “the trend is your friend” means that trades taken with the trend are lower risk. If everyone else is buying at the moment why do you want to sell!
Trend Trading:
Uptrend – In an uptrend the currency is going up in value Downtrends – In a downtrend the currency is going down in value Sideways Trend- The price is moving within a narrow range and isn’t really increasing or decreasing in value. This is known as a “ranging market.”
Trend Trading Successfully
One way that successful traders go about trend trading (with the trend) is to enter when there is a pullback to a support level within the trend. At this point a trader could buy in the direction of the current trend. This technique is known as “buying on dips”. A stop-loss for the trade would be placed below the lowest point that the price had traded in each pullback.The opposite approach could be used for a market in a downtrend. The downtrend is identified when the pair has been building lower highs and lower lows. By trend trading in the direction of the dominant Forex trends, you will have market momentum behind them. This helps to reduce risk of any open trading positions as you have the ‘backing’ of the market.
While it is of course possible to identify trades against the trend, any profits earned in this way will come with a much greater level of risk attached to the trade. This is because you are effectively buying against the general direction of the market or in other words gambling! Trend trading over time is lower risk and less stressful.
Trends can last for weeks, months or even years. A longer term monthly trend may contain several shorter term daily or weekly trends within it. As with Support and Resistance, a general rule is the longer the time frame the stronger the trend.
When I first started to trade Forex I started on the 15 minute charts where I consistently made losses. I started to make money when I moved to the longer time frames of 4 hours, daily, or even weekly charts. I recommend to anyone new to the Forex field to concentrate on the longer time frames as it is generally less stressful, and there is no need to sit at your computer the whole day.
This article covers the basics of trend trading, forex trends and how to analyse those trends. I cover this in much greater detail on my training course forexmentorpro where I go into great detail showing you live examples of trades via my daily analysis videos. Get your seven day trial of forexmentorpro for $1 here,