Are you a great golfer? Do you know how to play the guitar? Do you swim so well that people have urged you to compete in the Summer Olympics? Regardless of whatever special skill you possess, you must have had to start at the beginning in order to be the expert you are now. And while you may exercise that special skill with almost no effort at all, there was a time in your life when everything you did that ever related to that skill had to be thought out with precision if you hoped to get really good at whatever it was you tried to learn. Moreover, it s very safe to say that one of the first things you learned when perfecting a new skill was the vocabulary associated therewith. Similarly, if you re attempting to learn how to trade in the Forex market, which is also called the foreign exchange market, one of the first things you ll have to learn is a lot of trading vocabulary. Skipping this part of the learning process will hardly stand you in good stead if you hope to be a successful currency trader. Just as you wouldn t fly a plane without learning at least a little of the vocabulary and how it relates to flying, you wouldn t jump into Forex trading without knowing at least a little about the language traders use. After all, it takes a lot of time to become a good trader, and you should never automatically assume that you can just pick things up as you go along. Those who operate under this assumption often find themselves drowning in a financial storm at sea. And one of the first terms you should learn is the term trading trend.
What is a trading trend? Simply put, this is when the price of a particular currency moves consistently upwards or downwards during some fixed period. If the direction is upward, the trend is called bullish. When the price moves downward, the trend is called bearish. While such terms are relative, you should always remember that price troughs and peaks move consistently in one direction, and it is this direction that helps define the trend.
When one observes an uptrend, one can often draw what is called a support line under these upwardly moving trends. If a trend is moving downward, one can draw a resistant line above these downwardly moving trends also called downtrends. When these lines break, we say that the trend is complete. Once a trend has reached this stage, one can often observe the beginning of a reverse trend in the opposite direction. When it does, you must be able to anticipate how the trend is going to operate and what is entailed in the trend.
The term trend reversal simply means that the direction of market prices is changing. Much of the time, trend reversals follow a four-step pattern. First, the market trend will reach a new high. Next, the line will be broken. Thirdly, the market will make an intermediate low. Finally, we will see the market rally to a new high that does not match the first high. Sometimes, however, you will see prices break a previous low. Sometimes you will see terms like double and triple tops or bottoms. These terms all refer to reversal patterns. You may also see terms like head and shoulders patterns, which are also popular reversal patterns.
You may also have heard of the term trading range and wondered what this meant. In essence, a trading range is a sideways chart pattern that is often used to represent a resting period before the resumption of the original trend. You may see these trends quite often in your trading life, and should know their implications at all times.
Trends are often the most important things traders tend to observe. Those who carefully observe the progress of trends often base the decisions they make on the direction of the trends. While such can be an excellent winning strategy, it requires a great deal of knowledge about trends and the market in general if you want to be a success at using such trends. Beginners don t usually do so well at spotting and/or following trends. Moreover, some price moves are also trendless, which means that the currency in question is not moving in any one clear direction, so you have no real idea how to follow the possible trend.
In sum, you should note that in order to use trends successfully, you should be fully educated in the ways of the market and the currency exchange generally. Though you shouldn t necessarily rely on tracking trends if you re just beginning to learn, you ll understand it more completely as you learn more about it. Be assured, however, that different factors affect the currency markets, and these various influences can change one s expectations. Consequently, you should be a seasoned trader if you hope to rely on trends and ranges in and of themselves. Learn as much about them as you can, which means not only learning the terms, but observing them in action.
