Following the trend requires you to comprehend what a trend is. Trends can be technical or fundamental. In the following article on forex charts the discussion is all about technical trends. There are three types of trends you might see. There are additional words besides uptrend, downtrend, and sideways trends you need to learn in order to assess the forex market with a keen eye.
Forex Charts Terminology
Trend is a pattern seen in something. In this case it is technical charts. As an Aussie trader it is essential for you to see the correct trend, but to do so you have to understand what uptrend, downtrend, sideways trend, consolidation and other words mean. You should also understand reversal, which is why this section on forex charts is dedicated to terminology.
· An uptrend is like it sounds. In a currency pair you will see the graphed line moving in an up or increasing direction. The rate will move from 1.000 to 1.0001 in an uptrend. An uptrend can be a continuation or a new trend.
· Downtrend is of course opposite so the rate would move from 1.0000 to .9999. Again, it can continue or become a new trend.
· Sideways trend is not literally a horizontal line without movement, although it can be. Typically the sideways trend means the pair is moving within a range. This range is specified by a high and low rate. The high and low can vary on each reversal. For instance the high might be 1.0002, but next time the pair goes to 1.0003 and decreases to .9999 before going to 1.0001. This type of trend is also called consolidation.
· Reversal simply shows a change in the current pattern for the reverse on forex charts. If the pair went up to 1.0010 and then reversed to .9999 you had a reversal.
· Breakout is another term to get used to since the currency pair will leave the range and start moving in a flow trend. The range is the sideways trend or consolidation. The flow is when you have a period of an up or downtrend in which a new high or low is attained outside of the support and resistance range.
Checking Forex Charts for Trends
As you can see from the terminology of forex charts there are several words that can be used to mean the same trend. It is up to you to determine which of the trends are occurring and then follow that trend. You always want to follow a trend instead of buying in on the opposite side of things. This is especially true if you are a beginner to the Australian forex market. Beginners need to learn the ways of the market before trying to buck the trend.
You wouldn’t get on a horse to ride in a rodeo without knowledge and practise, correct? Well, in forex charts assessments you need to practise what a trend looks like and how to trade on it. You have a variety of charts to examine, but many prefer the line graph since it connects the rates rather than bar charts which show a full day from open to close.