Forex Trend Trading the Trend Is Your Friend

By Warren Seah

In forex ´trend ´trading‚ ´traders seem ´to employ ´the strategy of ´taking advantage of long ´term moves being played out in the markets܂ The ´trending system aims o work on ´the market trending behavior and benefit from both ´the bull and bear conditions܂ Traders who normally stick ´to ´this strategy uses market price calculation‚ moving averages‚ ´trend lines ´to determine ´the general direction of ´the market܂

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 Source: http://interpret.zar.vg

About The Author
Warren Seah

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