To begin with, we will define the trend – this is the direction of the price movement, which is the main one and remains for a long time. It is the definition of the main direction in which the currency pair is moving, and the opening of a position in the direction of the trend is the key to successful trading in the international currency market in the long term. All traders who trade on corrections, sooner or later get a big drawdown and suffer a loss.
That is why determining the direction of trend movement is the basis of successful and profitable trading.
How to determine the trend?
Each trader has his own approaches to establishing the main direction in which the price moves, but it is worth remembering that the currency pair never moves up or down continuously, there are always so-called corrections or kickbacks. Therefore, to determine the main movement, you must: Select the timeframe on which you are trading. Consider global trends, and not follow the price at any particular moment. Analyze the neighboring timeframes, since the graph on them may look completely different.
Remember the following points:
– the longer the direction of movement of a pair coincides on large timeframes, the greater its strength; – no trend lasts forever; – temporary changes in direction can be either a correction, after which the price will continue to move, or a reversal of the current trend on this timeframe.
Simplest methods for determining
Determining the trend to the eye is far from the most reliable approach, where it is more appropriate to use technical indicators. For example, this can be applied: – trend line; – a moving average with a certain period (if the price is above the average, then the trend is up, and vice versa); – MACD indicator (if the price crossed it from top to bottom, then the trend is downward, and vice versa).
It should be understood that determining the direction of price movement even with the use of technical elements is not a signal to open a position. The decision to create a buy or sell order must be made on the basis of the entire trading system, since you need to know not only the direction of opening a position, but also its volume, duration, and so on. At the same time, it should be said that without a correct definition of the trend, successful trading is impossible, even if its other elements are thought out to the smallest detail. Consider the most simple and demonstrative approach to determining the direction of price movement in your trading system in order to make it as efficient as possible.