Forex for beginners

Trade on the trend and price range in Forex

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As an international platform for exchange of currencies, the Forex market is fundamentally different from other trading systems is that they are decentralized. Nevertheless, the lack of specific location and Central exchange provides the opportunity for participants to gain a good profit.

The process of exchange of money happens through an electronic network of various actors: Central and commercial banking institutions, brokerage organizations and traders. Of course, for successful trading requires special knowledge that beginners and experienced needs to obtain regularly. Knowledge of terms trading dictionary and the basic principles of trading necessary and to exclude the possibility of large financial losses in trading.

Trade on the trend

Trend (trend) Forex is considered to be unidirectional price movement, existing a period of time. The famous theory of technical analysis of the Dow is based on two core concepts: the levels or the boundaries of the support / resistance and trend movement.

Market trends can be classified according to various criteria:

  • direction emit upward (bullish) and downward (bearish) trends. Bullish trend is characterized by the fact that each local extremum (minimum or maximum) are higher than the previous one. In the “bear” trend, each successive extremum is lower than the previous.

 

  • duration trends are divided into short-term (from one to several sessions), medium term (one to several weeks) and long term (year or more).

 

“The trend is your friend” — this expression is heard by many traders. Therefore, experienced traders highly recommend to open positions only with the trend. Some traders compare the trend with the huge heavy “roller”, against which “go” is not recommended.

 

Analyzing for example, the GBPUSD uptrend and most of the lows, you can get a support line. Moments touches and rebounds from this line are most favorable for opening long positions. Similarly, but in reverse, traders open sell orders at the time of rebound from the resistance line in case of a bearish trend.

To make the right decision at the right time to open an order for buying / selling, you should always initially analyze the price action on the higher timeframe. For example, during trading on H1 initially analyze the price movement on H4, and even better for D1. Therefore, more precisely determine the duration of the trends and possibilities of increasing profits.

 

When the price crosses the support (resistance) goes down (up), trend direction is completed.

Trend reversal

Needless to say that the trend movement in one direction may not last forever. To determine the trend reversal, namely the breakout of the trend line and subsequently a movement in the other direction, it is very important for every trader. From that point depends on how the profitability of transactions and prevent losses.

To determine the reversal can be with or without indicators, using classical patterns of technical analysis, trend lines and other ways.

Any cluster of candlesticks on the chart of the selected trading asset is of great importance to determine future price movement.

 

In the figure it is clearly visible, as before the breach of the price level marked consolidation. Pronounced price movement is missing. There was a slight, barely noticeable vibrations. After a certain time, with the required volume, the bears break the trend line and unfold the trend is down. After that, the turn becomes a fait accompli. Now support line for a certain time turned into resistance.

Another way of defining a trend reversal — use of figures of technical analysis.

 

The graph clearly shows one of the classic reversal patterns — Double-top. Outwardly, it it resembles the letter “M”. Seen as it was formed on top of bullish trend, then the price action turned down.

Another way to determine the change in trend direction — the use of Japanese candlestick analysis.

 

In this case, on the hourly chart of the asset GBPUSD clearly there is a “bearish engulfing”, then the direction of the price after the upward movement is reversed. Correctly and in time revealed a reversal movement allows the trader to enter the market at the beginning of the new emerging trend and get the maximum profit from the transaction.

Price range

Trade with the trend can be more successful if the trader has clearly defined price range. This price band is between the lines of support and resistance. Usually all traders are willing to buy the asset when the price bounces off the support line, and try to sell it when it’s a rebound from the resistance line.

Ideal this trade feasible in sideways trend movement with a sufficient level of volatility. The definition of The exact boundaries of the range are extremely important because they provide a guide not only for opening long and short trading positions, but also issuing a safety Stop-Loss, as well as determining possible targets (Take Profit).

Conclusion

For successful trading, obviously not enough to know the classical methods of determination of trend and a possible point of its reversal. In addition, the details should be chosen for trading assets to be able to use the technical indicators to apply in practice various trading strategies to trade fundamental factors. It should be remembered that the market is not static, it is constantly evolving.

However, the basic concepts of the trends are fundamental. Without them to further improve any trader to trade is unthinkable.

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