How to spot powerful and profitable trends

by , 20 August 2015

Many forex traders like to use technical analysis. This is because technical analysis tends to work well with forex trading due to currencies following strong trends.

So how can you spot a powerful trend?

Read on to find out…

Finding trends in forex and trading with them

One key concept that technical traders believe in is that prices move in trends.

As a trader, one thing you should always keep in mind is that you should trade with the trend. By trading with the trend, you can make profitable forex trades.

The easiest way to find trends is to look at currency pair prices on charts.

There are two main types of trend:

  • Uptrends; and
  • Downtrends.

What makes an uptrend and a downtrend?

You can identify an uptrend by finding a series of higher highs and lower lows. On the other hand, you can identify a downtrend by finding a series of lower lows and lower highs.

Have a look at the chart below. This shows you the pound against the US dollar. As you can see, it’s clearly a strong uptrend…

Chart of currency pair uptrend

From looking at the chart, you can see the price moving higher.

From the bottom left side it makes a new high. The price then falls back to hit a low, which is higher than the previous low.

From here, the price moves higher again, hitting a new high which is higher than the previous high. When the price pulls back, it hits a low which is higher than the previous low.

And the upward trend continues like this.

The above uptrend of the pound and the dollar shows a movement from 1.4860 to 1.7150, a significant move higher.

By managing to jump into a powerful trend, you can make profitable forex trades.

So there you have it. How to spot powerful and profitable trends.

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