Forex is one of the most accessible and popular financial markets in the world. To make money on it, traders conduct operations on price differences in currency pairs (fiat, cryptocurrencies) and other instruments. Active trading in the Forex market takes place around the clock, so it is possible to make money from anywhere in the world. The price of a currency pair is affected by market fluctuations, depending on the "market mood". During the market fluctuations, the trader earns or loses money. The jumps mean the price fluctuations and the phenomenon of the pair's value movement, in other words, can be called "trends".
The Forex market was not invented yesterday, so there are innumerable methods to determine the market trends. In this article, we are going to understand what a "trend" is and review the basic concepts.
Simply put, a trend is the price direction of a currency pair on a chart, where the influence of various factors and candlestick fluctuations during a set period of time are considered. By the value of the currency pair is meant the exchange rate. The purpose of the trader is to trade effectively, where it is impossible to do without understanding the price movement.
What trends exist on the Forex market:
- Bullish Trend: In a bullish trend, there is a continuous sequence of rising highs and lows. Each successive high and low is often higher than the previous ones.
- Bearish Trend: you will see a continuous series of highs and lows on the chart. Each successive high and low will be lower than the previous one.
- A flat trend: price is not fluctuating, so there is little or no movement up or down. More often than not, the highs are positioned in a jumbled manner and are plus or minus on the same level.
Depending on the trends, the trader chooses the most correct direction of the trading strategy. The ability to understand trends will help an investor to approach trading more rationally. Trading with an understanding of trends will increase the probability of income and save you from high-risk trades.
Following trends, of course, does not guarantee that all subsequent trades will be exceptionally profitable. An uptrend will not always continue to rise; it can collapse to a low, as it did in 2019 with the bitcoin chart, for example. Any theories are shattered by "black swans" or constantly fluctuating market sentiment. Certainly there are proven trends that set real market prices, but it is worth relying solely on your experience and a developed trading strategy.