How to find current trend in forex

3 Steps to a Forex Trend Trade.

by Walker England.

A trend trading plan can be created in 3 simple steps Traders can find a trend and then look to trade a price breakout Managing market exits can be done using previously identified highs and lows.

It can be extremely difficult for new traders to finalize a trend trading strategy for trading the Forex market. However, the good news is that most trend based strategies can be broken down into three different components. Today we are going to review the basics of a trending market strategy by identifying the trend, planning an entry, and identifying an exit.

So let’s get started!

The first step to trend trading is to find the trend! There are many ways to identify the GBPUSD trend pictured below, but one of easiest is through identifying if price is creating higher highs or higher low. If price is stair stepping upwards that means price is making higher highs, and the trend is up. Conversely if price is stepping down toward lower lows this mean price is potentially declining in a downtrend.

Given the information above, traders should look for opportunities to buy the GBPUSD in its current uptrend. Pictured below we can see the chart graphically creating higher highs. If the trend continues, expectations are that price will remain support and new highs will continue to be created.

Learn Forex –GBPUSD 4Hour Trend.

(Created using FXCM’s Marketscope 2.0 charts)

Once a trend is found, traders can choose from a variety of tactics to enter into the market. One of the easiest ways to enter into the market is through the use of a breakout. Since the definition of an uptrend is the creation of higher highs and higher lows, traders can plan to enter into the market when the trend continues and the GBPUSD breaks to a higher high.

Below you can see an entry to buy the GBP USD with the trend. Traders using this methodology can set an entry above this value and in the event price breaks above this value they will be entered into the market. There are two benefits of using an entry order . First you don’t have to be in front of your computer to be entered into a position. As long as you have an entry and the price you have selected is available for trading, your order will be triggered. Secondly, in the event price never breaks above the previous high this order can also be deleted. Now that we have an entry planned let’s look at completing our trading idea.

Learn Forex – GBPUSD Breakout Strategy.

(Created using FXCM’s Marketscope 2.0 charts)

When trading markets, there is always the potential to lose money. That’s why when trading trends, it is important to know that they will eventually come to an end. In an uptrend like the GBPUSD, traders may place stops under the previously identified swing low (higher low). In the event that price breaks under this value, it may symbolize that at least temporarily the GBPUSD trend may be ending. Traders can exit any positions at this point through the use of a Stop Order.

Knowing where to take profit is also an important part of any trend trading plan. Traders should look to avoid the “ Traders Number One Mistake ” by looking to make more in profits than what they risk in the event the trade moves against them. Using the example above, if a 150 pip stop loss has been set under the swing low, traders will expect more in return in the event that they are right. If a 300 pip limit has been set, this would create an expectation of a 1:2 Risk/Reward ratio.

---Written by Walker England, Trading Instructor.

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Here’s How to Tell When a Currency Pair is Changing its Trend.

by Richard Krivo.

One of the questions most often asked of me is how a trader knows when the trend has changed. While it is definitely an important question, the answer is also one of the most elusive. The answer is definitely not an absolute answer that is totally black or white and cast in stone for all time.

Let’s take a look at the Daily chart of the AUDUSD currency pair below…

The last candle on the left of this chart is dated December 15, 2011. This is when the current uptrend began. We can see on the chart that the uptrend consisted of price making higher highs and higher lows and breaking through the significant resistance level presented by the 200 SMA . Also, in the uptrend, the AUD was one of the strongest currencies and the USD was one of the weakest.

When all is said and done regarding the uptrend, price reached its highest point on February 29, 2012. This move to the upside lasted around two and one-half months and was comprised of about one thousand pips.

So when did the downtrend begin? To answer that, let’s look at the range .

Oftentimes, when an uptrend comes to a stop, price action will trade in a range or consolidate for a time. In effect, the uptrend “stalls” and the pair just bides its time until the market decides how it will continue to trade the pair. We can see this in the yellow rectangle on the upper left hand side of the chart.

In hindsight, we can see that when price broke out of that rectangle to the downside for the first time, THAT was the official beginning of the downtrend. However, since none of us has that infallible crystal ball, no one knew that this was the end of the uptrend and the beginning of the downtrend.

So as traders, what do we need to see that indicates a growing potential that a trend change is happening that is likely to continue?

Let’s reverse engineer what we saw happening in the uptrend. If we look for the opposite of an uptrend we should be looking at a downtrend.

If higher highs and higher lows make an uptrend, then lower highs and lower lows will make a downtrend. In looking at the right hand side of the chart we can see that this in fact is taking place. The more this process of lower highs and lower lows continues, the greater the likelihood becomes that this downtrend will continue.

We also note that as this move to the downside continues, the AUD becomes weaker and weaker and the USD becomes stronger and stronger.

While at no point in this process is a trend change guaranteed, the more the move continues, the greater the chance becomes that the trend change will become a reality.

Let’s look at three areas that I monitor when considering whether or not a trend change has taken/is taking place…

If the pair continues to make lower highs and lower lows and take out levels of prior support as it moves down, the pair is building a downtrend. The longer that process continues, the more likely it is that there will be a trend change. (How long is longer? Again, no black and white answer: Aggressive traders will call the trend change earlier and start taking short positions sooner than will a conservative trader.)

2. As price begins to move closer and closer to the 200 SMA , the closer it gets to it the more likely that we are looking at a potential trend change. (Once it trades through the 200 SMA and closes below it, that is very compelling data that the trend has changed.)

3. If the currency in the pair that had been the stronger currency has become the weaker currency in the pair and that change continues over time, that is pointing to the probability that we are looking at a trend change.

So while there is not much certainty in calling a trend change in the short term, the above three points are what I monitor to determine if a trend is continuing or losing momentum and ultimately changing its direction.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

Upcoming Events.

Forex Economic Calendar.

Past performance is no indication of future results.

DailyFX is the news and education website of IG Group.

Forex trading for beginners: how to determine a trend.

Continuing our series on Forex trading for beginners , we now look at how to determine a trend. I'm sure many of you have heard the saying at some point "the trend is your friend, until it bends". This says it all and is so true in the currency market - and any market for that matter.

Being able to determine the long, mid, and short term trends on a currency pair direction will greatly benefit you as a trader more than you can realize at this point. Trading in the direction of the daily chart while looking for entries on the lower charts is like having a strong, steady wind in the sails while in a boat race. Remember as currency traders, we don't care which direction the trend is: up or down, we just want the trend or momentum on our side.

The first thing I like to do in the beginning of my trading day is sit down and run through the daily charts of the currencies pairs I follow. Look for the strongest trend in either direction. Now since we are working with daily charts at this point, the next day will mostly present very similar results since we are dealing with strong long term trends. Do not cheat yourself and skip this step the next trading day. Looking across all the daily charts at least once a day will help you keep informed of any large moves in the market.

Below is an example of a currency pair demonstrating a strong trend.

Using the daily chart should make it easy for traders to determine if the currency pair is in a strong trend. If there is a question on whether the currency pair is in a strong trend - move on to the next currency pair chart.

Looking at the chart above we can see the EUR/GBP is clearly in an uptrend. We can verify our visual observation by confirming the candlesticks are moving from the bottom left hand corner of the chart to the top right corner of the chart. We also can confirm the uptrend by the higher highs and higher lows as it moves up toward the top right corner of the chart. The EUR/GBP is clearly in an uptrend.

An excellent beginners' strategy trading strong trends is what I call "trading support/resistance levels" and in this example we would use support levels as part of our entry point. What we look for in a strong uptrend is waiting for the price action to pull back to support. Here is the sweet thing about this strategy. You the trader, could still be working a full time job. Here's how:

Step 1: Each night after work look through your daily charts.

Step 2: Find the currency pair with the strongest trend (for this example let's use the chart above).

Step 3: Find the support level below the current price level.

Step 4: Set a buy order slightly above support.

Step 5: Set protective stop orders below the next support level.

Step 6: Set target orders slightly below the next resistance level above the current price.

That's it! Some brokers will send an or text message when orders are executed to notify you at work that an order has been placed.

The opposite holds true for strong downtrends.

Looking at the chart above we can see the EUR/AUD is clearly in a downtrend.  We can verify our visual observation by confirming the candlesticks are moving from the top left corner of the chart to the bottom right hand corner of the chart. We also can confirm the uptrend by the lower highs and lower lows as it moves down toward the bottom right corner of the chart. The EUR/AUD is clearly in a downtrend.

The same strategy trading strong uptrends can be used to sell strong downtrends. The difference is we look for a strong downtrend and wait for price action to pull back to resistance. The same 6 step process for uptrend strategy can easily be reversed and set for downtrends.

Step 1: Each night after work look through your daily charts.

Step 2: Find the currency pair with the strongest downtrend.

 Step 3: Find the resistance level above the current price level.

Step 4: Set your sell order slightly below resistance.

Step 5: Set protective stop orders above the next resistance level.

Step 6: Set target orders slightly below the next support level below the current price.

Bottom Line: By trading in the direction of the daily trend, traders will have a greater probability of success with the momentum of the entire market behind your trade.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of NASDAQ, Inc.

How to find trends in forex.

How to find trend in the forex market may not sound like something a trader needs to succeed in the forex market, but I is. Any forex trader that wishes to make it up the forex career ladder needs to know what forex trend is and how it applies in the forex market. It may be difficult for a new trader to find a trend and incorporate them into their trading strategies, but with a bit of a breakdown, it may not be so difficult.

WHAT IS A FOREX TREND?

In simple terms, a trend is the tendency for security prices to move in a particular direction. The price of a security can ether increase or decrease; trends in forex can be long term, short term, upwards, down wards, or sideways. If you will use forex trends to your benefit, you have to position yourself for profitable entry and exit point. The key is to detect the trend at a good time and either enter or exit a position as deemed fit, in order to maximize profit or minimize loss, as the case maybe.

To interpret a trend, one has to understand the place of the two different currencies that makes up a currency pair. A currency pair consist of, first, the base currency (the first currency quoted in a currency pair), and then the foreign currency (he second currency quoted in a currency pair). If the trend is rising, it means that a particular currency is strengthening against the other in a currency pair; if a trend is falling, it means a currency is weakening against the other in the same currency pair.

HOW TO IDENTTITYFY TRENDS IN THE FOREX MARKET.

To identify trends in the forex market, one can use any of the following methods.

LINE GRAPH METHOD:

A line graph has to do with charts used in analyzing the forex market. In observing charts, one can use bars and candles which provide detailed information about what is happening on a chart. As important as these details are, they are not necessary in the identification of the overall trend. With a line graph a trader can get a clear view of the direction the market is headed.

This is one of the most common forex trading tools used in identifying the market direction, amidst other functions. Note that to use moving average in the identification of forex trend, one has to be cautious and understand the implication of the moving averages.

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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