What Counts as a Trend in Foreign Currencies?
The easiest way to talk about a currency trend is to start with what’s NOT a trend. Any currency pair that’s trading in a sideways range (sideways range means that it’s a flat horizontal line on the chart).
So if the pair you’re watching seems to be going nowhere, then it probably is in a sideways range and doesn’t count as a definable trend.
To figure out if it’s in a sideways range, look at the far left of the chart below, where the price starts and then look to the right of the chart to see where the price is now. Did it go basically from the lower left of the chart to the upper right? If so, you have an uptrend.
Did the trend line move from the upper right of the chart down to the lower left of the chart? If so, you have a downtrend. Or in other words, look at the direction of the trend line (pretty basic).
Another way to define a trend is by watching its major low and high points. An uptrend has “higher lows and higher highs.” A downtrend has “lower lows and lower highs.” So it’s just the opposite of the uptrend.
What Separates Trends in Forex…
Students and readers often ask me how to tell the difference between a long and short-term trend. Well, while this is definitely debatable…let me tell you some ways to address this.
For most traders, a long-term trend is the one that they see on a daily chart that goes back a year or so. (Remember, a daily chart means that each candle covers a full 24-hour period of trading.)
Most traders define a short-term trend by looking at an hourly chart going back 20 to 40 days. Do realize though that if someone is an “intra-day” trader, then they may only look at a 15-minute chart that stretches out over a couple of days. So it’s all really relative to the timeframes in which you trade.
By Sean Hyman - worldcurrencywatch.com
Tags: currencies, Currency, foreign currencies, Forex, term trend, trade, traders, Trading, Trend, trend line, uptrendPosted in
