THE CONCEPT OF “TREND” IN THE FOREX CURRENCY MARKET
Even the most inexperienced novice trader understands that the ability to correctly identify a trend and predict its future direction is a key point in trading. Trend is the basis of technical analysis and a factor that must be considered in all circumstances.
So what is the trend in Forex trading? This is the direction of the price movement of a financial instrument, which reflects the state of the market as a whole. Trends are of three types:
The title itself already contains information about where the price goes. If the trend is up, then, accordingly, the price moves up, which means it is growing. If the trend is downward – it falls. A side trend indicates consolidation of the market, a state where quotes are moving in a narrow corridor, without going beyond it. Some traders call this state a lack of trend. In fact, this behavior of quotations indicates either the equality of supply and demand for the currency pair, or the absence of large financial players in the market, the so-called market makers, capable of influencing the situation.
Often, traders who are just starting to get acquainted with forex-related topics are surprised when they hear phrases like “the strength of bulls grows” or meet with concepts such as “bearish trend”, “bullish activity”, etc. each type of trend has two names. To avoid confusion, it is worth remembering that the upward movement of prices can still be called bullish, and the downward movement – a bearish trend. Therefore, if you hear the phrase “bears clashed with bulls,” do not rush to imagine a picture of the terrible fights of the animal world, perhaps it is just about trading in the Forex market. Side trend is also called flat. In general, the concept of a trend is used in various fields, for example, in the fashion world, and characterizes what is relevant at the moment. In Forex, the direction of price movement is one of the most relevant concepts.
How to use trend in trade?
One of the important conditions for successful trading on Forex is skillful use of the trend. It is absolutely not difficult if you know how to “read” correctly and predict its direction. Graphic elements that are best used even by those who are just starting their acquaintance with Forex trading are best used for such purposes. After the trend is determined, you should wait for the correct entry point into the market and then open a deal. Naturally, with a growing trend, it is better to open a position to buy a financial instrument, in order to sell a currency later when its quote reaches a higher level, and if a downward trend is to sell the currency, then buy it cheaper. With a flat, experienced traders advise to refrain from trading, as it is difficult to determine when and where the price will begin to move, especially if you are a novice trader. In any case, it is always better to follow the analytics provided by large and reliable companies such as, for example, UBK Markets. Thanks to the quality work of professionals, you will always know what the trend is in the market, where it originates, and when you can expect a reversal in price movements.
The trend can be called the main basis, because it is customary to reckon with everyone who trades on the Forex market: the largest financial companies, traders with many years of experience and newcomers. For novice traders, trend trading is a great opportunity to quickly learn how to understand the market and make significant profits.