A trend is a price movement in a direction. The ability to detect a trend accurately can enhance your performance considerably. Unless we learn to identify the major trend in the market, we will be losing money most of the time. Professional traders always take their trades with the trend as it helps them to make wise decisions at trading.
In general, we have three major kinds of trends in the market. These are:
- Uptrend (bullish)
- Trend down (bearish)
- Trend horizontal (flat)
An uptrend is a higher and lower sequence where the next high and low are higher than the prior. A downward trend is a series of decreasing highs and downs, each of which is high or low below the last. A horizontal trend is a price fluctuation without even a clearly defined rise or fall. There are lower parts along the horizontal borderline, or beyond your position, there is no apparent rationale.
It should be noted that real-world trends are seldom 100% accurate to the description. You may find an upward trend in which the next level is lower or a downward trend. In short, we can say, you will find trends within the trend. But if you learn things precisely, you should be able to deal with such market conditions. Always remember, options market is very dynamic in nature. You must learn to identify the major deviations to find the profitable trade signals.
These deviations to the principles are inevitable since the truth is ever different from theory. In actual-world trading, such an inflation rate that best matches the description can reasonably be seen as a trend.
You can receive an estimated price movement projection after successfully identify a trend. The pricing might, of course, differ from the primary trend in practice frequently. But this trend enables you to grasp something significant – the direction in which trade is more lucrative. A trend reversal is rarely simple to correctly identify, therefore trading against them typically leads to losses and can be hazardous. Therefore, trading towards the trend is considerably more sensible.
Use of a trend in your trade
Place better purchase orders in the event of an increasing trend. Sell orders preferable in the event of a downtrend. It would be helpful to avoid trading if the trend is not clearly defined, as the price movement would be difficult to anticipate in this situation. If the price creates a clear corridor sideways with enough height, you can sell and purchase in the bottom area of the passage.
Trend on the free index
A visual analysis of the price motion on the chart is the most evident approach to detect the trend. It is crucial to record the location of highs and lows. You can tell whether the movement is rising, falling, or horizontal, depending on its position on the chart.
Each low is lower in a downward trend than the preceding one, each high in an upward direction. An upward or down movement is constant in the instance of a trend. For example, a rapid spike in prices in a few hours is not a pattern if we look at the hourly chart. In contrast to its significant movement, price retracements are often minor, and prices swiftly revert to their former values.
Use of trend indicator
Sometimes a trend is less apparent. Thus, on the indicator-free chart, it isn’t easy to recognize it without ambiguity. Traders use trend indicators in these instances. Consider some of the trade terminals available in the MT4 by default. It is crucial to realize that trend indicators are effective only under a trend and generally don’t operate when prices move sideways.
Use of moving average
One of the simplest indications used to build other indicators is the given indicator. The average movement value indicates the average price value in a certain period. With varying statistical values, the latest and further candlestick closing prices may be considered. There are many forms of trend lines depending on that: straightforward, weighted, fluid, and logarithmic.
A currency rate trader is making money, and a trend is a movement. A trader can, therefore, best benefit from a trend. Thus, the Holy Grail market is an indication or instrument that can precisely identify trends. Those who benefit from price noise, but the enormous profits are due to changes of the movement are also counter-trends techniques.