Trends in forex trading are a very simple forex strategy…
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Trends in forex trading are a very simple forex strategy that helps the traders to estimate the price movements of a currency pair. It helps in estimating appropriate entry and exit points for a currency pair. Trend trading is being used by the forex traders at all levels for successful trades.
When you collect all the data points from the past and plot them into the chart, you start seeing a direction in which the currency prices are heading towards. This is called the trend in forex which lets you estimate the prices of currency in the future based on the analysis of past currency movements.
Types of the trend:
There are basically three types of trends that are seen in the forex market, i.e. uptrend, downtrend, and sideways/horizontal trend.
Uptrend: It is a series of the escalating highs and lows. In an uptrend, each successive low must not fall below the last lowest point. Otherwise, it is considered a reversal;
Downtrend: it is a series of the descending highs and lows;
Sideways/Horizontal trend: It occurs when there is very less movement up and down in the peaks and troughs. Some experts believe that is rather not a trend since it does not show any direction or movement.
Apart from the type of trend based on direction, it can be a long-term trend, or an intermediate trend, or a short-term trend. The long-term and intermediate trend is a collection of various short-term trends.
Trendlines are the lines which are used to define the trend in a currency pair. It is basically a charting technique. It is trendline only that helps us to identify the trend accurately, especially in the case of reversals, trendlines are helpful for easy identification. Trendlines help the traders to successfully estimates the points at which the currency pair shall move upwards or downwards.
There are many benefits of trend trading in forex. But, you need to learn how to identify and understand trends to take profitable decisions instead of losing money by investing against the trends. Trend trading helps you escape out a bad trading strategy only if you study the trends accurately. Moreover, studying trends in different currency pair help you identify currencies with better pips available. Trade in currency pair that has strongest trends to earn more profit. That’s the reason trend trading is so popular.
If you can earn big by trading in forex, then there are equivalent chances than you can also lose big. There are no golden rules that can be learned to become a successful forex trader. Trading in forex is an art that gets better with patience and practice over the period. So, you also need to invest your time in learning as well, with money to master the art of forex trading.
Here are some of the tips that can help you become a successful forex trader:
- Identify yourself:
Before just jumping into the forex market and start trading, you need to identify yourself, i.e. your financial goals that you need to achieve with forex trading and determining your risk tolerance. This will help you estimate the amount of money that you are ready to invest in forex market comfortably based on your risk appetite even if you lose it.
- Make a master plan:
You need to create a definite plan that will list how much time you will invest in learning, at what point you will start trading, when will you consider pulling out of the market when you are losing money and much more. Do not just create a plan you need to stick to it, so that you have defined an action plan.
- Invest time in learning:
Forex trading is not a rocket science that cannot be learned. In fact, it is very easy to learn with just a few things that you should know. At least try learning the basics first before you start trading in the market. There is ample of material available over the internet and offline also that you can use.
- Go slow:
Forex trading is a risky affair with equivalent chances of losing and gaining the money. So, do not rush and take small steps at a time. Do not invest too big amounts at one time and define the exit points where you will pull out of trade in case you are losing money to minimize the losses. Also, consider a secondary earning option apart from forex trading to safeguard yourself from huge financial disasters.
- Keep yourself informed:
You need to keep yourself informed about the various factors that affect the prices of the currencies in the market. It can be economic conditions, political conditions, or any natural disasters that can bring a change in the currency movements. So, you need to be updated about all the market news so that any profitable opportunity does not go unnoticed.
- Keep a trade journal:
Making a note of all your trades in a journal whether it was profitable or not. This will help you study the strategies that you followed in the past which results into profit as well as losses and help you learn from your own mistakes as well as successes.
- Be patient:
Patience is key to success in forex trading. It takes some time to gain an understanding of all the aspects of the markets. Also, do not just lose heart and stop trading if you are just losing money. Rather, hold yourself up again and restart with newer strategies.