Forex trend is an integral concept of technical analysis that provides information about general direction of the market. A trend can either be long-term or short term, depending upon economical, sentimental and other fundamental influences.
These trends are primarily categorized into three types:
Horizontal or Sideways trend
Uptrend is the successive movement of graph with higher trough and peaks. It often denotes rise in the price of currencies or commodities. Uptrend always consists of higher highs and higher lows.
Downtrend is just the opposite of uptrend where the peaks and the trough lowers, depicting that the value of currency has decreased beyond what is was before. So downtrend always consists of lower lows and lower highs.
Horizontal or Sideways trend occurs when there is minimum up and down movement seen in the graph. Though it may not offer a well-defined direction, but when a particular movement is anticipated then it can help in understanding whether the graph will rise, go lower or remain in a stable position.
Length of Forex Trends
Similar to the direction of trends, they are even classified in terms of their time period which can be intermediate, short-term or long-term. In forex trading, a major indicator is the one that comes with a long timeframe, while intermediate would last for about three to two months and short terms stay less than a month. An intermediate trade occurs when the major trend moves upward with a downward correction and then follows continuation of uptrend. The short term trends are regarded to be combination of both the intermediate and major trend.
Channels and Trend lines of Forex Trend
Trend line is a charting technique, where lines are added to simplify the direction of a currency. These lines can be beneficial in identifying reversals, as they support the graph every time when it moves in an uptrend. Similarly, it can even be used by traders to anticipate the particular point from which the price might start moving upwards again (moving support). Vice versa applies for downtrend lines.
Channels are a combination of two trend lines flowing parallel to each other. The channel can be placed in any form (sideways, downtrend or uptrend) to interpret the levels of support and resistance.
When analyzing these trends, it is essential to understand the type of trend and what will be the direction in the upcoming events. Chartists make use of a golden rule of thumb: the longer is the trend the more important it can be for your trade. For instance, the impact of a trend that lasts for a span of five years will be much more when compared to something that stays for only a year.
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