Forex trading isn’t as easy as you may think since there are more layers to the practice than just the exchange of currency for another. Trends run the game of forex, and they are critical in the trading plans. Charting analysis of forex trades can be checked to see how trends work in the market. Make it a point to keep a tab on these factors to form strong strategies for your trade. Identifying the trend is the crucial part in making profits from forex trade. In this form of trade, the security that is traded between investors is a currency pair that fluctuates with the differing market sentiment. The market functions all day round for 5 days a week across multiple time zones to make the trade a comfortable one for traders across the globe.
Identifying trends can be done easily by the investors using different techniques, but make sure to pay attention to the fluctuations within the market. Trends in forex trade are the price behaviors of various currency pairs that keep increasing or increasing over time. The two types of trends that occur in the forex trade are bullish and bearish trends.
When a currency pair’s price moves up or down over a specific period, and if the direction is identifiable, a trend is existent in the forex market. The exchange rate is used to quote the price of a currency pair, where the value of one currency is calculated relative to another. One of the best trend indicators is said to be the moving average of the price of a currency pair. A trend would be falling when a moving average is falling, and they both climb at the same time too. Here are some methods that can be adopted to find out the trends that are present in forex trade at a given time.
· Moving Average Crossover
Charts track the moving average of a currency pair, and many investors view the exchange rates on these charts. When a short-term moving average of a currency pair price increases or decreases over the long-term moving average, a crossover occurs. An uptrend happens in examples such as a five-day moving average crossing above a 20-day moving average of the currency pair price.
· Price Action
Fluctuations in the price of a currency pair throughout a day could create a high and low price. A “higher high” is created when the current high price of a currency pair crosses the high of the previous day. A “lower low” is formed in the same way when the low price falls lower than the previous day’s lowest price. A forex trend is also demonstrated when the higher lows of a currency pair combine with the higher high. Three consecutive higher lows with three higher highs could set an uptrend, whereas three consecutive lower highs and three lower lows would indicate a downtrend.