Identifying The Trend Part 2 Forex Trading #investing
A trend is a tendency for prices to move in a particular direction over a period. Trends can be long term, short term, upward, downward and even sideways. Success with forex market investments is tied to the investor's ability to identify trends and position themselves for profitable entry and exit points.
Trend trading is a trading style that attempts to capture gains through the analysis of an asset's momentum in a particular direction. When the price is moving in one overall direction, such as up or down, that is called a trend. Trend traders enter into a long position when a security is trending upward. There are three main types of trends: uptrend, downtrend, and sideways. During an uptrend, there are higher highs and higher lows. On closer inspection, one can notice that each top is higher than the previous top, and each bottom is higher than the previous bottom. An uptrend is likely to continue in the same direction.
In a downtrend, there are lower highs and lower lows. On closer inspection, one can notice that each top is lower than the previous top and each bottom is lower than the previous bottom. Just like uptrends, the downtrend is likely to continue in the same direction.
When the market is not trending, it doesn’t move upwards or downwards. Instead, it moves sideways. On closer inspection, one will notice that in a sideways market there are approximately equal highs and equal lows. Another way of defining this sideways movement is by calling it a range. Unlike uptrend and downtrend, a range is more likely to break out either above or below the sideways pattern.
