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Identifying a Forex Trend

Identifying a Forex Trend

Walker England, Forex Trading Instructor

Article Summary: Trend traders enjoy the luxury of first identifying market direction prior to executing a trading strategy. Today we will review the basics of trend identification.

Traders look to identify market trends to take advantage of the extended directional moves provided by Forex currency pairs. Trends can last for days, weeks, months, or even longer allowing traders to bias their positions in one specific direction. If a trader can find the direction of the trend, it can exponentially increase the likelihood of having a successful trade.

To begin our discussion, we will first review how to identify an uptrend on our graph. Today we will begin with an example using the USDJPY weekly chart.

Learn Forex – USDJPY Daily Uptrend

Identifying_a_Forex_Trend_body_Picture_2.png, Identifying a Forex Trend

(Created using FXCM’s Marketscope 2.0 charts)

Identifying a Trend

Identifying a trend is the first skill we need to master before considering a trading plan. An uptrend can be defined as a market that makes a series of higher highs and higher lows. Pictured above, the USDJPY is an excellent example of a continuing trend. Since the first low pictured at 75.56 the pair has advanced as much as 2817 pips! Notice how the pair has now made a series of higher highs as this uptrend has developed over the past 2 years. This is indicative of a strong trending move and our trend is expected to continue as long as our lows and highs continue to increase in value.

Uptrends are the perfect environment for finding buying opportunities. As seen in the daily graph above each time the NZDUSD has moved temporarily lower, it has found support prior to moving on to higher highs. Regardless of the strategy used, trend traders will continue to buy this uptrend until it concludes with the creation of a lower low.

Learn Forex – FXCM Mirror Trader

Identifying_a_Forex_Trend_body_Picture_1.png, Identifying a Forex Trend

(Created using FXCM’s Marketscope 2.0 charts)

Trading the USDJPY Trend

Once a trend is established, there are a limitless number of ways to trade them. One method is to employ a simple trading strategy. However for those that are looking to trade trends, but spend less time in front of their charts, may consider using FXCMs Mirror Trader. Using the Mirror Trader software, traders can select from a variety of trend based strategies. This includes DailyFX PLUS trading signals which can be applied to over 14 different currency pairs.

These strategies can be applied at any time, while allowing traders the ability to customize position size and currency pair selection. To learn more about using the Mirror Trader platform, join us for a LIVE webinar walkthrough. Walkthroughs will begin at 3:00 PM Eastern on Wednesdays in our FXCM classroom. Join in and learn more at the link HERE!

---Written by Walker England, Trading Instructor

To contact Walker, email instructor@dailyfx.com . Follow me on Twitter at @WEnglandFX.

To be added to Walker’s e-mail distribution list, send an email with the subject line “Distribution List” to instructor@dailyfx.com .

Do you want to trade Forex, but don’t want to monitor charts full time? Take advantage of FXCMs auto trading Mirror Trader platform. For a review of the software and a complete platform walkthrough, click HERE.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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