Forex market trends Trends study provides additional edge to any Forex trading strategy or system.

After identifying the main trend traders can use it to their advantage by taking positions on the market that follow the direction of the main trend and ignoring trades that contradict with it. Current trends study is done once a day in the morning. Thus while daily trend remains applicable for the rest of the day, 4 hour trend suggestion carries absolute accuracy only for the next 4 hours after the signals update. Needless to say that trend is you friend. If you know about a trend direction and trade with it, your winning trades percentage in Forex will rise. Facts about market trends: 1. There are only 2 directions in which the market can move: Up and Down. For a trend trader it means that at any moment of time he can identify the prevailing trend and stick to it. 2. Even when the market is ranging, the dominant trend is still there, and many experienced traders use those quiet periods to re-set and add to their positions while always considering the dominant trend. 3. Try not to take trades against the major trend, unless you have a solid strategy or a good reason to take on risks. That said, don't try to predict a reversal by jumping in earlier, instead see the reversal and act upon it. Such actions require patient waiting, which experience traders are well familiar with. 4. If you happen to try counter-trend tactics, keep in mind that risks are more higher when you try to Buy in a downtrend versus attempts to Sell in an uptrend. The reason for that is that uptrends tend to progress at a slower pace and often have an extended reversals with many opportunities to correct/re-think your counter-trend position; while downtrends have a tendency to go develop much faster. Taking a counter-trend trades in a Downtrend as well as trying to predict a reversal is similar to trying to catch a falling knife. 5. If possible have few trading strategies in the tool box: one for trend trading, another for range bound trading. 6. While in a trend, allow your trading position to run for as long as the trend is there. It is easier said than done, buton the other hand, cutting your trades before they reach their maximum power is also not the best tactic to use in the currency speculation world

Trend lines - forex trends

There are some types of trend lines in technical analysis. They are the followings:

Ascending trend Descending trend Reversal trend

Market trends seem to follow geometric patterns as they go through both low and high trends. An uptrend creates a series of trends that have higher lows and highs. A trend line drawn between the rising lows can often be fairly accurate in determining where the market can find greater support during the next low trend and indicate fairly good buying levels. Many Forex traders will choose an area below the trend line at which stop orders are are placed resulting in a sharp sell off. New sellers are generally attracted by breaks below the uptrend line. It's quite normal to see a series of lower lows and lower highs during adownward trend in the market. In this case, the trend line is drawn in alignment with the descending highs and will mirror the analysis as described above. Every possible piece of information that is known is included in the price of a security, for this reason technical analysis will hold up. This information removes the necessity to analyze the political, economic and fundamental factors that have a big influence on price. Since all of the information that is available is already factored into the current price, the price movement is all that needs to be analyzed. The tendency for prices to trend isn't guaranteed; therefore any analysis should rely on common sense and empirical evidence. The fact that prices do trend is supported by the time proven Dow Theory. For example, if homeowners have some reason to believe that Forex interest rates will increase and depreciate the value of their homes, they will be more likely to consider selling. Three similar homes in the same area could be sold at various prices. This would be much more preferable to dropping the prices of the homes down to low simply based on interest rates. Prices will tend to move more consistently over a period of time, but in the same direction.

With numerous participants in a large market such as global equities, prices often tend to move from high to low in one direction. But, prices will continue on a downward slope until a balance is reached between buyers and sellers. Sometimes this slope is gradual and sometimes it can happen really quick, but it's what a technical analyst tries to identify and exploit. When this trend is identified, a house may be sold short because the trend is getting lower. Price trends are one of the major concepts that give value to a technical analysis. If someone disagrees with the Dow Theory, they will usually disagree with a technical analysis as well. A technical analyst theorizes that all investors display the same type of behavior. There are the repeating attitudes that "Everyone wants in on the next Microsoft", "Stock in a company with a new technological invention will sky rocket". While this might be an irrational theory, it does still exist. A technical analyst will even create a chart showing patterns of price movements are predictive qualities. Since their primary concern is price trends, they are interested in anything that can influence prices. Some even monitor the enthusiasm that investors display with surveys. These surveys are used to attempt to determine the attitudes the investment community has and whether they're going to be bullish about the investment or eager. They also gather information from surveys to help determine if a particular trend will reverse and whether new trends are about to develop. Extreme reactions from investors can alter the outcome of a technical analysis. If most of the investors surveyed are bullish, it's a good indicator that there are very few buyers remaining in the market place. If investors appear to be long, there are generally more sellers than buyers and indicates the market is trending down. This concept is referred to as contrarian trading

Ascending trend
Anytime that the demand for currency exceeds the currency offered, the exchange rate on Forex grows. On the other hand, if the volume of currency for sell is less than the volume that participants are seeking to buy, the market rate falls. When the demand lasts for a long time, it causes a rate in growth and will lead to the market being saturated. From the time that offers exceed demand; the sales are decreased in rate. Trend corrections are the movements that are directed against the direction in which the previous trend was headed. This movement doesn't surpass the previous trend. A trend is considered a phenomenon that will return prices to a correct channel and does not allow the movements in the market to deviate from the fundamental factors. If participants will open long positions and when satisfied by the increase of an exchange rate sell with a purpose of profiting quickly, it is called an ascending trend. But, if the principal factors that have resulted in an increase in the demand for currency have not changed, it renews the buying of currency and increases the rate. Then that particular movement takes a direction. There are two kinds of trend: ascending and descending trend. Ascending trend - An ascending trend is any period in which exchange rates reach a higher value when compared to the previous rate. It's an upward gain in rates from the rate before it. The bottom points of waves (local minima) join a direct line - trend line:

Example of an ascending trend

Descending trend
Descending trend - Whenever the current rate of exchange depreciates, it is a descending trend. It is simply, when the rates value becomes lower. Trend lines are drawn by connecting the highest peaks of local maximums for ascending rates and the local minimums for descending rates.

Example of a descending trend When the trend lines form a straight, or more even line, it confirms that particular trend. One of the criteria for determining trend force is examination of breaks in the support or resistance levels. Any trend that receives a lot of resistance will be weaker. And, without support, the trend will eventually change in the future. There are several general rules that are followed in defining trend force: 1. The longer a trend lasts, the stronger it becomes however there is still a limit. 2. When a trend begins abruptly and ascends or descends quickly, it's a strong trend. 3. If a trend line reflects a long, level line, it's very likely the trend will continue. 4. While an abrupt trend usually indicates a strong trend, they can also change abruptly. 5. No matter what the trend is, it will eventually slacken. High trends will eventually become lower and low trends will eventually rise

Reversal trend
A reversal trend refers to the changing of a trend, change is expressed when the rate changes direction after a break, or penetration point. However, a reversal trend needs to be differentiated from a deviation. A deviation is a simple change in trend that doesn't lead to the complete change of the trend. On Forex, when a change in a ascending trend is confirmed, it signals a good time to sell. But, when the change in a descending trend is confirmed, it represents a very good time to buy. The best way to confirm the change of either trend is to monitor the trend lines. Confirmation can be noted when a trend that met with a lot of resistance becomes a trend that is highly supported, or just the opposite.

Transition of a support line to a resistance line

In recent months trading some of the major pairs has been a frustrating business. For those of who love to trade trends and breakouts they have been fairly non-existent, especially for EURUSD and GBPUSD. This has been frustrating for some and led to a lot of false signals. Not that long ago for example EURUSD was lingering well below 1.30, next it looked like 1.3500 was in sight and now the single currency is hovering somewhere in the middle. In a mere few months we have swung from the bears being in the ascendency to the bulls and now it feels like we are in nomans land. Indeed range-trading markets in FX can be frustrating, but we should all get used to it. Far from being an anomaly in FX, FX markets tend to get stuck in range-trading ruts the bulk of the time. As a general rule FX markets tend to range trade 70% of the time and trend for only 30%. However, trends tend to grab the headline and range-trading is the fairly unsexy end of FX trading that gets little air time. But when looking at FX markets its important you know how to deal with a situation when a trend just aint forthcoming. But there are trends if you look closely: Indeed, even though it looks like EURUSD might not be going anywhere fast there are some pairs out there that are trending. USDJPY has had a major reversal and now looks like it may head to 85.00. Likewise, the Canadian dollar and Mexican Peso have also performed well versus the Aussie dollar. Australias economy is being hit by Chinas downward revision to growth while the CAD and the Mex are benefitting from their close links to the US economy, which is showing signs of improvement, and from the fact they are oil producers and as long as tensions between Iran and Israel persist then the oil price is at risk of moving higher. To conclude, sometimes markets can be frustrating to trade but if you look hard enough then the trends are out there. And if they are not then get yourself a robust range-trading strategy like the one above.