Trends represents one of the most essential concepts in technical analysis. All the technical analysis tools that are used have a single purpose and that is to help identify the market trends. What is a Forex Trend? Much like any other trend for example in fashion- it is the direction in which the market moves. More precisely and good to know, the foreign exchange market does not move in a straight line, but more in successive waves with clear peaks or highs and lows. Depending on the movement of these ‘highs and lows’ one can then understand the trend’s type. There are three types of trends that the market can move in:
Traders and investors confront three types of decisions:
- To buy
- To sell
- Do nothing
During any type of trend, traders should develop a specific strategy. The buying strategy is preferable when the market goes up and equally the selling strategy would possibly be profitable when the market goes down. But when the market moves sideways the third option – to stay aside – will be the cleverest decision.