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Forex Trend Trading -the Trend Is Your Friend
So what is a trend? Most common definition for a trend is where the market creates a higher low for uptrend or lower high for downtrend. The market movement isn’t always pretty, not expecting the price just to go up all the time. There are times when the market needs to rest for awhile before heading up further in the intended direction and at times may even break the higher low or lower high. Actually that makes sense the fact that market will always correct itself and retraces back time to time just like the ebb and flow of the waves. So how do we observe trend through technical analysis? There is some basic trend analysis which I can show you that I regard as indispensable when doing trend trading. Trend lines The simple plotting of a trend line on the chart is often overlooked and may even be ridicule by some as subjective tool for analysis. The fact that this simple drawing of a line on a chart requires some attention to certain details on the chart. When a trend line is properly drawn, the trend analysis will provide lots of important details to aid in your trading decision. But if it is drawn due to being the trader think what the trend is based on the trader’s emotions, the details interpreted might spell trouble. The validity of the trend line itself must be supported by the prices on the chart and traders tend to have many variations as to how they want to draw their trend line. More details on how to plot a proper and valid trend line will not be discussed here but you can refer to various books out there as guides or to be mentioned more in depth in my further articles. Moving Averages Another method of identifying trend is to study the moving averages. Using a mathematical approach in analyzing the market past data, it provides a more objective perspective on the market. The most common form of MA used is the simple moving average with other forms of MA like exponential moving average used also. The main point is that these MA helps the trader to determine where the market believe the value lies with the basic understanding that if price trade above a certain average value the market is in an uptrend. There are several variations in the use of MA and some common ones are having a few different periods of MA to determine the turning point of the market as an indication the current trend is ending and a new one is looming. Having these two basic tools for forex trend trading is just a starting guide to aid you in your trend trading. Having to master these two tools together with a combination of other trend indicators will allow you to develop a certain edge over other traders as you get better and better. Feel free to use this article on your website or ezine as long as the following information about author/website is included. Article Directory: http://www.articledashboard.com Warren Seah |
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