The easiest way to make money on Forex is to trade with the trend. Having determined the general trend of price direction, it is possible to minimize trading errors, and it is almost guaranteed to make a profit.
What is a trend?
Definition
Trend - directional price movement, one of the main components of graphical analysis.
Trend characteristics
- Smooth price movement over the entire trend interval.
- Kickbacks (movement against the trend) are insignificant and short-term.
- A trend usually begins with a powerful spurt in price changes - a price impulse.
- The uptrend first goes to the side and only then to the downtrend (and vice versa). That is, the price does not change sharply, but for some time fluctuates in a small range.
There are several types of trend.
Trend types
Downtrend
if the price falls for a while, then this is a downtrend. Traders call this type "bearish" (by analogy with a bear, crushing the price with its paws, causing it to decline).
An uptrend
if the price rises for a while, this is an uptrend. Traders call this type of trend “bullish” (by analogy with the bull pushing the price up with its horns).
Lateral trend (flat)
there is no pronounced price movement in a narrow range (corridor) of values.
As a rule, opening deals against the trend is prohibited.
You can determine the trend using a variety of indicators and a special tool - a trend line.
Types of Trend lines
If you look at the price chart, you can see maximum and minimum peaks. If you draw a line connecting the peaks of the maximum or minimum, then it will be called the trend line. This tool was created to give Forex charts greater visibility and to better identify a break in the trend - it occurs when prices break through the trend line. This does not happen often, since the trend line is usually stronger than price volatility.
Just as there are different types of trends, the trend lines are divided into:
The resistance line
is the line that goes through the peaks of the maximum price, and resists further price increases. We can say that prices seem to bounce off the resistance line and begin to decline.
Support line
a line that goes through the peaks of the minimum, preventing further price reductions and forcing them to rise.