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Trading with the trend is key to success, here's how to spot one…

by , 06 October 2015

Trading with the trend can improve your chances of profits.

So how can you see what the trend is?

Read on to find out…

Why trends are so important

Stock markets and other financial markets tend to move in trends. You should be able to spot trends in shares and indices. And trading with the trend can be extremely lucrative with the forex market.

A trend is basically the main direction of the price of an asset. There are two main trends to look for:

  • Upward trend: A succession of higher highs and higher lows.
  • Downward trend: A succession of lower highs and lower lows.

When you draw a trend line onto a chart, it’s a straight line which connects the top or the bottom limits of a price range, explains Frank Hemsley in Profit Watch. This gives you the overall trend.

A trend line needs at least two tops or bottoms to rest on. The more times you see points touching a trend line, the stronger and more significant the trend tends to be.

Putting trend lines to work

It’s very simple to add trend lines to your charts. You should be able to do it with the platform you use for trading.

Look at the price chart of a share or other asset. Can you see if there is an uptrend or a downtrend?

Add some trend lines in by sticking to the rules above. Keep an eye on these charts and watch how the price of the asset reacts around these lines.

So there you have it. How to spot a trend.

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Trading with the trend is key to success, here's how to spot one…
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