Forex Trends: What a Novice Trader Should Know
What is the trend? Sharefounders broker explains: when talking about the forex market, this is the trend in price movement of a chosen currency pair. But taken solely, the concept of a trend is abstract: it obtains the meaning when it becomes clear, which particular trend is under discussion. There are two groups for trend classification: by time, by direction, and the additional characteristic is the trend strength. The experts in Share founders broker company provide a detailed typology of trends.
What is the direction of the trend
Many of you have probably seen a famous statue on Wall Street in New York: the fighting bull and bear, a bull is trying to raise a bear by the horns, and a bear is trying to press the bull to the ground. These two animals symbolize the movements of the price trend on any stock exchange or market, including forex, Sharefounders confirms this. A bull symbolizes a rising price, and a bear symbolizes a falling one. The monument is closely related to the popular stock exchange terminology: “bulls” are the traders who try to raise the price, and “bears” are the traders who play to lower the price.
Correspondingly, when the price of a chosen asset - for example, a currency pair - goes up, this is called the uprising trend, uptrend, or bullish trend. And when it moves down, this is a bearish trend, or downtrend, or decreasing trend. If the price remains unchanged for a certain period of time or makes the chaotic jumps up and down around a certain level, Sharefounders broker calls this a flat trend.
How trends vary by the strength
The change of the asset price can occur in different ways. After the release of the unexpected news, the price fluctuations can be very sharp. According to Sharefounders, feedback and reaction to the reports depend on the coincidence of the story with expectations. When the information meets the market expectations, the price can change smoothly. The strength and direction of the trend do not depend on each other: for example, an uptrend can be stable and robust, or weak and uncertain. But the trend remains upward. Of course, for forecasting and planning, it is convenient to focus on a strong trend, according to the experts of the broker Share founders.
Differences in trends over time
The duration of the trend is one of the key characteristics for a trader in the forex, Sharefounders checked this fact on the personal experience. Opening a position, the trader takes in mind a specific forecast regarding the trend movement at a particular time. For example, the size of the deal depends on this forecast.
Forex trends are short-term, medium-term, and long-term. Short-term trends exist within one trading day. Trading on short-term trends is the must-try for the novice traders, who want to make a quick profit without paying an overnight commission fee. Share founders broker offers favorable trading conditions, including an overnight.
You have probably heard about the scalpers - traders who open super-short positions chasing the short-term trends. The length of such a position is very small as if it is cut with a scalpel. This explains the origin of the name. The scalping can bring quick profit, but it also has many disadvantages. For example, the profits from scalping may not overlap spreads. Besides, many brokers prohibit scalping. It is easy to lose control of the emotions, lose a deposit, and then make claims saying Sharefounders scammers.
The medium-term trends last from one day to a month. They are the most appreciated by experienced traders who trade according to the plan. The fact is that medium-term trends can be perfectly predicted. In some cases, when the vital information appears, and the trend reverses sharply, the traders set the stop-loss levels. This helps to secure the trader’s funds, prevent disappointment and accusations against the broker that Sharefounders scam.
The long-term trends last from a few months to a year. Such trends appear under the influence of deep fundamental factors. For example, the current long-term downtrend of the US dollar is the result of overheating in the US economy, according to Sharefounders. Reviews show that the US economy has been growing for 11 years in a row. It is enough to complete the small economic cycle and to start the recession. But to navigate in long-term trends, the trader must have fundamental knowledge in the economy and carefully monitor the changes. For most traders in the forex market, there is no sense to focus on long-term trends, but you should not ignore them.
What is trading along with the trend and against the trend
Trading along the trend is based on the assumption that the trend will continue for some time. A trader opens a position in the same direction where the trend is moving. Then the position is closed automatically, at a preset take profit level, or the trader closes it manually. Taking profits in manual mode, the trader must closely monitor the market to avoid missing the moment and then declaring that Sharefounders scam.
Trading against the trend is based on the assumption that the trend can reverse at any moment. The longer the trend stays unchanged, the more positions open against the trend. Closing a position after a trend reversal, a trader can make a significant profit. But in general, the trading against the trend is considered riskier than trading along with the trend. Entering a market against the trend is recommended only to experienced traders. If a trend does not reverse, many traders cannot resist the temptation and increase the size of the deposit - after all, a trend reversal is about to happen, and the position will close with a significant profit. This is a direct path to deposit loss and heated discussion on the forum that Sharefounders scammers.
We do not persuade you to trade without risk. Any highly profitable market - like the forex market - is always associated with certain risks. But any threat should be well-thought and calculated, so even when you close a deal without profit, you should have a way to compensate for the loss.