TMCnet Feature
August 17, 2022

How long should you follow a trend in forex and when might that trend reverse?



In the world of FX trading, you will often hear the phrase ‘the trend is your friend’. This can sometimes seem like one of those glib sayings which does not mean much when trading for real. This is actually not true and fully understanding this saying can really help your trading journey. This is especially true for new traders who find following the trend in FX a much easier way to get into investing.



But what is a trend in FX, how long should you follow it for and when might a current trend reverse?

What is a trend in forex trading?

In simple terms, a trend in forex trading is when a currency pair is showing a clear upward movement or clear downward movement in its price over a period of time. For more information on this sort of trading approach, the latest forex strategy articles at Forex Traders are worth checking out. This website is a trusted resource for traders online and has plenty more nuggets of information about trends in FX.

It is often advised to follow clear trends in FX trading because it means you are going with the market, rather than against it. It can also be easier to spot trends in currency pairs, and this makes for an easier, more reliable method of trading.

How long should you follow the trend for in forex?

Just as knowing the benefits of workplace wellness programs is key in business, anyone investing in FX should know about how long to follow a trend for. The obvious answer is until it changes direction or levels off! There is no point trying to follow an upward trend which has started to move downwards after all.

But how do you know when the time for following the trend is over? It all comes down to being able to read price action charts properly. A popular tip is looking for common candlestick patterns on charts which can signal a change in the trend. You could also use popular chart indicators, such as RSI, to see if the current trend is likely to continue.

When might a trend in FX reverse?

It is important to know when a current trend in Forex might reverse – not only because you can look for trading opportunities there but also so you can bank any profits on open trades before it does. This will most commonly happen when buyers in an upwards trending market run out of steam and vice versa.

Another sign to look for is a pair which is trading at the top or bottom of their historic range. This could signal a change of direction is on the cards as they hit the top/bottom of the market and change direction. It can also be sparked by breaking economic news related to the currencies in the pair.

Trends in forex trading a key concept

There is little question that trends play a major role in the forex market and FX trading. While there are other strategies you could use, many people stick to trend trading for its relative ease and reliability.


 
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