This article looks at the forex charts and the trends you can find on them.
It is possible for you to determine the direction a currency’s value may take if you collect sufficient data and pinpoint it on forex charts. The trend can sometimes be identified quite easily, but there are times when the data that is available requires you to chart a longer term to initiate a trend. This is particularly so during high volatility periods.
This is the reason why trends generally move in sequence where you will find gradual movements in the lows and the highs. To make it easier to identify, you can describe an uptrend as a range of upward climbing lows and highs. A downtrend can be described as a series of downward highs and lows. To keep an uptrend in its position, it is required that successive lows not go below the last level of its lowest point. If it goes below that point, it can be determined as a reversal.
The Types of Trends You Find
The three main trend types can be termed as up trends, downtrends and sideways. The trend that goes sideways is during periods when there is very little movement the two other trend types. Many traders who are responsible for maintaining forex charts feel that a sideways is not actually one of the trends. It is simply a lack of a noticeable movement in a specified direction.
The Length of Trends
There are three basic time periods linked to the three types of trends. Irrespective of the direction in which the trend is moving, it could be classified as either short, intermediate, or long-term. In this trading environment, a long-term trend is normally classed as a group of intermediate trends. The short-term trends in forex are made up of major trends and intermediate trends.
The Use of Forex Charts Trend Lines
Trend lines are a specific chart technique which indicates the trend in a currency pair. It is composed of a straight line which follows the trend that was set. Trend lines are also made use of to indicate trend reversals.
A line that moves upward is normally shown relative to the lows of an upward trend. A downward line is normally indicated at the highs of the downward trend. This indicates the level of resistance that a currency pair will endure when there is an upward price movement from low to high.
You can make use of various charts that will give you the chance to try and predict the movements of the pairs you are trading. You should investigate a few of these charts to try and find the ones most suited to your trading strategy. The more popular charts are head and shoulders, bar and candlestick.
Candlestick charts show the currency value upon opening, at its lowest, at its highest, and upon closing for a specified day. The wide section of the chart is indicative of the range that was there between the price at opening and the price at closing of that day.
Another popular forex chart is the head and shoulders. It indicates the point at which it is predicted that the currency will fall or rise.
You should learn and understand methods of identification of the different trends which will allow you to trade in the same direction of your currency pair, instead of moving in another direction.