The trend is my friend ? Why ?
The trend is my friend is a very used sentence in trading, but what does it really mean?
To analyze a trend we will be based on what happened in the past to get an idea of what will happen in the future. Being able to determine the trend will help us to increase our chances of profiting steadily in the Forex markets. Hence the sentence, the trend is my friend. Thus, by identifying the underlying trend, it will be easier to determine the direction of a currency pair.
If a trend is bullish, this means that the rate is rising, buying the currency pair will give us a better probability of making profits.
If a trend is bearish, this means that the rate is falling, selling the currency pair will give us a better probability of making profits.
How to identify a trend?
It is necessary to identify the net evolution of the price of a currency pair to identify the trend. So we can see if the market is bullish or bearish.
When a trend is formed, the different movements begin to form summits and valleys.
In an bullish trend, the different movements will form higher peaks and valleys. So it is better to buy a currency pair.
In a bearish trend it is obviously the opposite that happens, so the serie of summits and valleys is getting lower and lower. It is therefore best to sell a currency pair.
Indeed it is always preferable to negotiate according to the trend rather than being against it. The chances of success will be much more likely.
Attention, some days, we will find that the trend is difficult to identify and looking carefully no one distinguishes any trend. This is called a “range” period. In this case it should be noted that the trades become random and risky. In this case we must remain patient before entering in position.
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