Determining and Trading the Trend in the Forex Market

One of the most important elements for a forex trader to implement involves knowing when to enter the market and initiate trades. Although it may seem just as important to know when to get out of a trade, entering a trade makes up a large component of any forex trader’s success.

Indications for Direction and When to Enter the Market

Many traders rely on the USD forex news for indications on the direction of other currencies versus the dollar. Nevertheless, a Euro currency forecast against other major currencies gives experienced forex traders indications on other important cross rates.

In addition to employing the USD forex news and online forex news, an additional resource used by many traders to determine direction in the forex market is the realtime forex news, which covers forex news as it happens.

Many successful forex traders admit that they rarely get in at the top or bottom of major moves, but, instead get in on the move once the direction has been confirmed. Often, more than one indicator and in many cases a combination of indicators is used to determine the direction of a currency pair such as AUD/USD, for example.

A forex professional will often have the patience to wait and get in on a major move once they are confident that the pre determined conditions they are watching are met. This avoids the trader initiating trades on false signals.

The key is being aware of what signals to watch and then initiating trades promptly once these trading conditions are met. As an example, The Australian Dollar often moves in sympathy with the price of gold.

Once the trader becomes aware of a major move in the price of gold, the exchange rate AUD USD is highly likely to also make a similar move.

Identifying the Trend

A trading maxim often repeated among professional forex traders is “the trend is your friend”. This summarizes how trend traders approach trading and offers insight into what to look for when initiating trading positions.

A tried and true method for determining a forex trend consist of studying historical price charts of the currency pair’s exchange rate over a period of time. Technical data and its analysis has often been the first line of approach for many traders when discerning the market’s overall trend.

Trends also occur during different time frames: long term, medium term and short term.

Trading with the Trend

After an accurate determination of the direction of the trend, a professional trader can use the online forex news to get in on a trade using an item in the news for an optimum entry point. Using stops at key points which indicate a price reversal in the price chart will protect the trader’s profits

Once the trader has discerned the major trend, they can trade the trend in the medium and short term depending on what type of strategy they intend to implement. Many traders keep a watchful eye on the realtime forex news to catch key trend reversal points made after the release of major economic data.

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