How Do You Identify a Trend in Charts?
How Do You Identify a Trend in Charts?
A trend in forex is the tendency of prices to move in a particular direction for a period of time in a general direction upwards or downwards.
Trends can be analyzed using trend lines.
Trend line analysis helps traders to define the direction of the market. Trend lines connect a series of price highs or price lows forming a sloping trend that represents the general movement of price.
For an upwards sloping line this is known as an upwards trend - the trendline plotted is referred to as an upwards trend line.
For a downward sloping line this is known as an downward trend - the trend line drawn is known as an downward trendline.
Upwards Trend Line
An upward trend line is drawn below upward sloping pattern by connecting at least two lows. This will draw a trend line that illustrate general direction of the market upwards.
The example below shows how price moves when it is moving in an upwards trend. The price will move up-wards forming support zones.
Since the market moves in a zigzag manner traders normally draw a trend line which displays the general upwards trend direction.
What's an Examples of a Trend? Identifying Trends in Trading
An upwards trend occurs when the price makes consecutive higher price highs & higher price lows. Each price high is higher than the previous price high - higher high: HH, & each price low is higher than the previous price low - higher low: HL.
Up trendlines gain more validity every time price touches but doesn't penetrate it. An upward trend remains in place until this series of higher price highs & higher price lows is broken - trend line break reversal signal.
Downwards Trend Line
A downward trendline is drawn above pattern formed by consecutive lower highs, it must connect at least two highs, with recent most high being lower.
Since price moves downward in a zig zag manner traders normally draw a line which displays the general downwards direction. In market technical analysis, this general market direction is referred to as the Forex TREND by online traders. This down trendline is plotted on chart showing the resistance levels (bearish trend market move direction).
What's an Example of a Trend? Identifying Trends in Forex
A downwards trend occurs when the price makes a series of lower highs & lower lows. Each price high is lower than the previous price high - lower high, and each price low is lower than the previous price low - lower low: LL therefore displaying bearish price movement.
Down trendlines gain more validity every time price touches but does not penetrate the trend line. A downward trend remains the general price direction until this series of lower price highs and lower price lows is broken - trend line break reversal signal.
How Do You Identify a Trend in Charts?
