How to recognize a trend?

Welcome on the forextraderportal.com. In my lessons on Price Action, I often say: “Trade with the trend”, “opening positions with the trend increases the chances to succeed in the deal,” etc. But how to recognize this trend?

What is a trend?

What is a trend

Trend - is a general direction of the market. No market does move in a straight line, so we need to identify the general trend: upward or downward.

The opening of the trade in the direction of the trend helps to increase the chances of success. Of course, Price Action setups against the trend work out pretty good too, but when trading with the trend, we can be more relaxed since the risk of getting a loss is significantly reduced.

There are plenty of forex indicators, systems and theories to determine the direction of the current trend in the market. But trade by Price Action implies a rejection of indicators and monitoring of the situation on the market on the basis of the main indicator behavior - price. Therefore, when determining the trend, we will be guided only by the price, on the basis of the most classic interpretation of the trends in the forex market.

Uptrend

The uptrend is series of rising peaks (highs) and bottoms (lows)

On the basis of this rule, we determine whether there is a bullish market trend. When there is no presence of rising highs and lows anymore - we are looking for SELL opportunities.

On the upward market after the previous low breakdown possible trend change to bearish can be considered.

Downtrend

Downtrend - series of declining peaks (highs) and bottoms (lows).

From this, we deduce a rule:

We can think of a reversal of the downtrend when the market broke through the previous high.

I do not understand what trend is now, what should I do?

Quite an important point - if you can not understand what trend is now, and it is often the case in periods of consolidation when the market moves in a horizontal direction, then just do not do anything.

Many people make the mistake of believing that they always have to trade. No way. If you take only the “beautiful”, clear and understandable setups, this will be much more profitable than trying to grab each point. Be selective in your trades, if you don’t understand where the market is moving now - do not trade, wait for the situation clarification.

When to enter the market?

As we said at the beginning of this article, the market does not move in a straight line. There will always be setbacks and periods of consolidation. In such periods you should enter the trade, guided by the basic direction of the trend.

Yes, sometimes Price Action setups are formed on the pulse movements and work out well, but safer and more profitable are the entries on the pullbacks.