How deeply trending Forex trading market works and how does its important

A trending market is one in which price is generally moving in one direction.

Sure, the price may go against the trend every now and then, but looking at the longer time frames would show that those were just retracements.


Trends are usually noted by “higher highs” and “higher lows” in an uptrend and “lower highs” and “lower lows” in a downtrend.


When trading a trend-based strategy, traders usually pick the major currencies as well as any other currency utilizing the dollar because these pairs tend to trend and be more liquid than other pairs.


Liquidity is important in trend-based strategies. The more liquid a currency pair, the more movement (a. k. a. volatility) we can expect.How deeply trending Forex trading market works and how does its important

The more movement a currency exhibits, the more opportunities there are for price to move strongly in one direction as opposed to bouncing around within small ranges.


Other than eyeballing price action, you can also make use of technical tools you have learned in previous sections to determine whether a currency pair is trending or not.


ADX in a Trending Market

A way to determine if the market is trending is through the use of the Average Directional Index indicator or ADX for short.

Developed by J. Welles Wilder, this indicator uses values ranging from 0-100 to determine if the price is moving strongly in one direction, i.e. trending, or simply ranging.

Values more than 25 usually indicate that price is trending or is already in a strong trend.

The higher the number is, the stronger the trend.

However, the ADX is a lagging indicator which means that it doesn’t necessarily predict the future.

It also is a non-directional indicator, which means it will report a positive figure whether the price is trending up or down.

Take a look at this example…

ADX greater than 25 usually indicates a trend

Price is clearly trending downwards even though ADX is greater than 25.

Moving Averages in a Trending Market

If you’re not a fan of the ADX, you can also make use of simple moving averages.

Check this out!

Place a 7 period, a 20 period, and a 65 period Simple Moving Average on your chart.

Then, wait until the three SMAs compress together and begin to fan out.

If the 7 period SMA fans out on top of the 20 period SMA and the 20 SMA on top of the 65 SMA, then the price is trending up.

Moving averages in an uptrend

On the other hand, if the 7 period SMA fans out below the 20 period SMA, and the 20 SMA is below the 65 SMA, then the price is trending down.

Moving averages in a downtrend

Bollinger Bands in a Trending Market

One tool that is often used for range-bound strategies can also be helpful in trend discovery. We’re talking about Bollinger Bands or just Bands.

One thing you should know about trends is that they are actually quite rare. How deeply trending Forex trading market works and how does its important


Contrary to what you might think, prices really range 70-80 percent of the time.


In other words, it is the norm for the price to range.

So, if prices deviate from the “norm” then they must be in a trend, right?

What is one of the best technical tools we have mentioned in the previous grades that measure deviation?

If you said a ruler, we give you mad props for effort.

If you said Bollinger Bands, we’ll give you cyber milk and cookies! Here, take some.

forex trending market

Bollinger Bands actually contain the standard deviation formula. But don’t worry about being a nerd and figuring out what that is.

Here’s how we can use Bollinger Bands to determine the trend! Prepare for the craziness.

Place Bollinger Bands with a standard deviation (SD) of “1” and another set of bands with a standard deviation (SD) of “2”.How deeply trending Forex trading market works and how does its important

You will see three sets of price zones: the sell zonethe buy zone, and the “No Man’s Land“.

Using bollinger bands to identify trend.

The sell zone is the area between the two bottom bands of the standard deviation 1 (1SD) and standard deviation 2 (2SD) bands. Bear in mind that the price has to close within the bands in order to be considered in the sell zone.

The buy zone is the area between the two top bands of the 1SD and 2SD bands. Like the sell zone, the price has to close within the two bands in order to be considered in the buy zone.

Additional information of this  post 

In the fast-paced world of financial markets, understanding **Forex trading trends** is pivotal for success as a trader. The ability to analyze and capitalize on market trends can lead to lucrative opportunities in the foreign exchange market. This comprehensive guide will delve into the intricacies of **Forex trading trends** and provide valuable insights to help you navigate this dynamic landscape effectively.

**1. What are Forex Trading Trends?**

**Forex trading trends** refer to the general direction in which a currency pair is moving over time. These trends can be classified into three main categories: uptrend, downtrend, and sideways trend. Traders utilize various technical and fundamental analysis tools to identify and profit from these trends.

**2. Importance of Forex Trading Trends**

Recognizing and following **Forex trading trends** is essential for making informed trading decisions. By understanding the prevailing market sentiment, traders can enter positions with higher probability of success. Trend following strategies are widely used in the Forex market due to their reliability in capturing profitable opportunities.

**3. Technical Analysis in Forex Trend Trading**

Technical analysis plays a crucial role in identifying **Forex trading trends**. Chart patterns, trend lines, moving averages, and oscillators are among the popular tools used by traders to analyze price movements and predict future trends. Understanding these technical indicators can enhance your ability to spot trend reversals and entry points.How deeply trending Forex trading market works and how does its important

**4. Fundamental Analysis and Forex Trends**

In addition to technical analysis, fundamental factors also impact **Forex trading trends**. Economic indicators, central bank decisions, geopolitical events, and market sentiment can influence the direction of currency pairs. Combining technical and fundamental analysis provides a comprehensive view of market trends.

**5. Key Strategies for Riding Forex Trends**

To capitalize on **Forex trading trends**, traders employ trend-following strategies such as moving average crossovers, trend continuation patterns, and breakout trading. These strategies help traders enter positions in the direction of the prevailing trend, maximizing profit potential while managing risk effectively.

**6. Risk Management in Trend Trading**

While **Forex trading trends** can offer profitable opportunities, it is crucial to implement robust risk management practices. Setting stop-loss orders, calculating position sizes based on risk tolerance, and diversifying trades can help safeguard your capital in the face of market volatility.

**7. Developing a Trend Trading Plan**

Creating a well-How deeply trending Forex trading market works and how does its important defined trading plan is imperative for successful trend trading in the Forex market. Define your trading goals, risk tolerance, entry and exit criteria, and position sizing strategy. Regularly review and adapt your plan in response to changing market conditions to stay ahead of **Forex trading trends**.

**8. Embracing Continual Learning and Adaptation**

The Forex market is dynamic and ever-evolving, making it essential for traders to embrace continual learning and adaptation. Stay updated on market developments, enhance your trading skills, and be open to refining your strategies to align with shifting **Forex trading trends**.

**9. Automation and Algorithmic Trading**How deeply trending Forex trading market works and how does its important

With advancements in technology, automation and algorithmic trading have become popular tools for capitalizing on **Forex trading trends**. Automated systems can scan the market, execute trades, and manage risk based on predefined parameters, offering efficiency and precision in trend identification.

**10. Conclusion**

In conclusion, understanding and leveraging **Forex trading trends** are fundamental aspects of successful trading in the foreign exchange market. By honing your technical and fundamental analysis skills, employing proven trend-following strategies, managing risks effectively, and staying adaptable to market changes, you can navigate the complexities of **Forex trading trends** with confidence and competence. Stay vigilant, stay informed, and ride the waves of **Forex trading trends** towards profitable trading endeavors. How deeply trending Forex trading market works and how does its important

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