How to determine the trend – Forex trend indicators
What is trend on Forex? How to define the trend without indicators and trend reversal on the chart? How to build a trend line? What are the Forex trend indicators without redraw? All of this you can find in our article.
Hello friends traders. From the previous articles you already know how to determine levels of support / resistance and to read Japanese candlesticks on the chart and trading patterns of candlestick analysis. However, this is not of little value without an understanding of the trend, i.e. where will the price move in real time. Today you will learn how to identify a trend on a chart what are the different types of trend how to trade with the trend and identify trend reversals, and how to construct a trend line. In addition, for our readers we have prepared the trend indicators, which you can find in the trading terminal MetaTrader 4.
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What is trend on Forex?
If you look at the graph, we can see that the price can move up, down and horizontally (sideways movement). Horizontal movement is also referred to as flat, and the movement up or down trend. Trend is price movement in the selected direction. The trend can be bullish (or bullish) and downward (or bearish). The trend and levels of support / resistance have one thing in common. As you move prices upward when the upward trend is consistent with the penetration levels of resistance. While the trend is the same consistent penetration levels of support.
How to define the trend without indicators?
In Forex, a trend is a price movement in which each subsequent extremum is higher than the previous one in an uptrend or lower in a downtrend.
In other words, the price moves from level to level, and then punches him and begins to move to the next horizontal level. Thus, we see that during a bullish trend, each subsequent low is higher than the previous.
If you connect two low slope line, we get the trend line. Each subsequent minimum will bounce from the trend line or be in close proximity to it, and the break of the trend line will indicate a trend reversal.
If we draw a parallel line through a first maximum at the beginning of the "bullish" trend, we get the upward sloping corridor, which will bargain the price.
During a bear trend, each successive maximum is below the previous one. If you connect two of the maximum slope line, we get the trend line. Each subsequent high will also bounce off of the trendline or near it, and the break of the trend line will indicate a trend reversal up. If we draw a parallel line through the first minimum at the beginning of the "bear" trend, we get a downward sloping corridor, which will bargain the price.
Thus, the trend line in an uptrend is a support line and trend line in a downtrend is a resistance line. Trend line we need to make deals to rebound from these lines. During an uptrend we will buy from the trend line, and during a downtrend – sell. While locking profit we will be at the price approaches the oppositethe boundary of the channel.
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The rules of trend trading
- In the presence of a trend it is necessary to consider transactions only in the current direction of the trend. If the trend is upward, it is possible to consider only buy and if downtrend then we can open trades only on sale;
- Open trades should be from the trend line with the placement of the stop loss behind the line;
- The closing of the transactions should occur near the opposite border of the channel;
- In case of breaking the trend line, you should close all trades regardless of loss or profit;
- It is not recommended to open trades against the trend.
Trend indicators without redraw
Now we look at Forex trend indicators that you can easily find in your MT4 trading terminal. They will help you to determine the trend direction and the reversal.
- The Moving Average Indicator. This is the simplest indicator to determine the direction of the trend. It represents the average price over a certain period (for example, 14, 50 or 200 candles). The higher the period, the smoother MA. Intersection of Moving Average with the price serves as a signal for trend reversal;
- The Bollinger Band Indicator. This indicator shows the deviation of price from trend. Around the price built line of Bollinger Band, which are lines of support / resistance. The slope of these lines can determine the trend direction and the width of the channel between the lines to judge the strength of the trend. The greater the width of the channel, the stronger the trend;
- The MACD indicator. This is an oscillator indicator, which with the help of histogram columns of different colors can show the direction of the trend and its reversal.
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Now you know all about how to determine the trend, how to draw a trend line and to find trend reversal on the chart and how to trade in the upward and downward trend. One of the ancient sayings of trading says: "The Trend is my friend!". Keep this in mind and do not trade against the trend!
Read also the article "Review of the trading platform MetaTrader 5".