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Trading Forex Trends

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Trading Forex Trends

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Trading Forex Trends

 

 

Types of Trends

 

When
the average price of a currency moves to a particular direction repeatedly then
that is termed a trend. There are three types of trends found in the forex
market: Long term, Medium term and short term.

 

The
trend that has duration of greater than 6 weeks is called a long term trend.

 

A
medium term trend lasts from 1 to maximum 6 weeks.

 

Finally
a short term trend occurs for a very short period of time – from 30 minutes to
a week.

 

Most
of the successful traders made their fortune by following either long or medium
term trends as they are easy to identify and less risky to trade. In contrast,
short term trends often reverse suddenly, and the increase trading costs of
moving in and out of positions means that short term trend following is less
profitable.

 

Causes of trends

 

The
economic condition of a country plays significant role in the occurrence of a
trend regarding its currency. Good economic conditions appreciate the value of
a currency relative to others whilst a negative economic outlook depreciates
the currency.  Since the economy of a
country changes fairly slowly, the trends can be quite long term.

 

The
trend of a currency depends on perceptions of traders, based on known economic
information. Traders often come to a consensus, and this opinion tends to
result in trends.

 

Also
when a trend is identified, the majority of the traders tend to follow that
which reinforces the trend.

 

Profiting from trends

 

Identifying
a trend and knowing the entry and exit point of it is the key for your success
in forex trading. Every currency has its own trend with unique characteristics.
You can identify the trend of a currency by comparing its present price
movement with historical data. You need to enter the trend on the basis of its
direction. When you see the trend is about to exhaust, close your trades.

 

For
example, if US dollar loses its value against the other major currencies, you
can recognize the trend regarding this and can buy EUR/USD pairs. You need to
set the stop loss point in a level where the stop will only get activated if
the trend changes its direction. You should not over- leverage yourself as you
are going for the long term trend and need to withstand some short term adverse
movements. You can understand the movement by closely observing the price
chart.

 

http://myforextradinghelp.com My
Forex Trading Help provides a wealth of detailed information on forex trading.

 

Jubair
Ahmed is a senior writer/analyst for My Forex Trading Help (http://myforextradinghelp.com)Article Submission, an
information site offering free tutorials on becoming a successful forex
trader. 

 

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