Study Forex Trends the market is trending up, down or sideways, recognising it early is crucial to aligning your trading strategies with the prevailing direction. For example, an uptrend is characterised by a currency pair making higher highs and lower lows. A downtrend may be driven by negative economic news, or it could be a result of a loss in investor confidence. A sideways trend, on the other hand, is characterised by prices moving within a narrow range with no clear increase or decrease.
Build a Strong Forex Portfolio: Balancing Risk and Reward
In order to identify and capitalise on trends, traders can turn to technical or fundamental analysis. The former is all about using charts and indicators to predict price movements, while the latter looks at economic factors and news events that can influence currency values.
There are a wide variety of tools available for identifying market trends, from graphical displays like line and bar charts to complex technical analysis such as fibonacci levels and chart patterns. Traders can use these tools to pinpoint potential reversal points, such as double or triple tops and bottoms, or look for support and resistance levels.
One of the most basic ways to assess a trend is through a line chart, which plots a period of pricing data without showing the high, low and open price for each timeframe. This is known as a’mountain chart’ and is often used to assess long-term trends. IG also offers a free economic calendar specifically designed for forex trading, which maps out the major political and economic events that may impact the market.
