The majority of forex traders will use trends when they trade. Many traders find that this is the easiest and simplest way to trade. Of course, when you look at trading on the trends you need to be able to identify them on the forex charts. You should also know about the stages that trends can go through so you have a better understanding of what you are trading.
Forex Charts Trend Technical Indicators
When you use the forex charts to determine the trends you are going to trade on you have to know which indicators you should use. There are many indicators that you can place on you forex charts, but you have to know which ones will help you with the trends. The best trend identification tools would be moving averages and the MACD. The MACD can also help in determining the trend strength which is something you need to know if you are going to trade on it.
Before the Trend Begins
When you are trading on a trend you actually have to start looking for it before it begins. This stage of the trend can often be identified with the use of two moving average lines. When the lines range close together this could be the sign of an upcoming trend.
There are also a number of chart patterns that you can look at which tell you about trends. Some of these patterns are very common while others are not very common. Some of the common patterns you can look for are the engulfing candles, the head and shoulder pattern and the double tops or bottoms. The double tops or bottoms is actually one of the most commonly seen patterns on the forex market.
When you find these trend indicators you have two choices of trades that you can use. The first is a reactive trade which waits for the trend to start before the trade is placed. There is also the proactive trade where you place the trade before the trend starts. The proactive trade is much riskier as you do not know whether the trend will start or when it will start.
The End of the Trend
Knowing when a trend starts is very important but you also have to know about when a trend is about to end. The end of a trend can be anticipated through a number of things. The first is the technical indicator that told you the trend ways going to start. The indicator will generally start to level out when the trend starts to lose momentum.
You can also look for chart patterns that indicate a reversal in the trend. Another way of knowing that a trend is going to end is through the market sentiment. This is not as accurate as other methods because of the difficulty of getting market sentiment for the entire forex market. Any sentiment that you see is generally for a small portion of the market. However, this can help you determine the end of a trend.
Most forex brokers tell you the market sentiment of their traders. When this reaches a high level in one direction the trend may come to an end. This is due to there being too few traders left to push the trend momentum.