Trend Forex
Very often in trading recommendations you can find advice to trade only with the trend. What is a Forex trend and how to use it when choosing the direction of transactions.
Trend Forex is the preferred direction of movement of the exchange rate over a certain time period (timeframe). Shows where the price of a currency pair is currently moving.
It is characterized by such indicators as strength, duration, speed and dynamics.
Main characteristics of a forex trend
1. Direction is the most accessible indicator; it is the one that is important when choosing the direction of future positions. Its definition is usually based on price minimums and maximums an upward trend is observed in Forex ; in the same case, when each minimum is lower than the previous one, we can speak of a downward trend .
Sometimes it happens that it is impossible to clearly determine the direction of the exchange rate movement, the price moves horizontally with virtually no change, the market at this time is in a flat state .
the time frame itself on which the analysis is carried out plays a decisive role , since different trend directions may be observed in adjacent time periods.
For example, for H1, a price drop may just be another pullback that lasts only one hour, but for M1 it is a stable trend. 2. Strength is a rather relative indicator, since it is practically impossible to measure how strong the existing trend is.
The strength of a trend depends on the factors that influenced its appearance. That is, it is more appropriate to use a fundamental analysis of the latest news that caused a price reversal when determining it. The stronger the event that affected the currency, the longer the existing trend will last. 3. Duration – determined by analyzing all available timeframes; if on H1 you see that the price reversal occurred a day ago, then this will be the duration of the trend for H1.
A similar approach is used for other time periods. 4. Speed – the price in an hour can move only a couple of points, or it can overcome all 100. In practice, I usually use the average speed of price movement, which can serve as a guide for placing pending orders and predicting the profitability of transactions.
5. Dynamics - or the range of price movement; a trend never moves in a straight line; more than half of its fluctuations occur during the time when a correction occurs; it is its average value, together with the indicator of movement towards the main trend, that will characterize the currently existing trend.
For example, over a certain time period, the average correction value is 15 points, while the main movement lasts no more than 12 points, an indicator of 27 points will characterize the dynamics.
This meaning may have other interpretations.
Trend Forex is one of the most important factors that a trader focuses on when opening transactions. The bulk of positions are opened following the trend, during periods of its greatest strength, and its dynamism serves as a guide when setting a stop loss order .