Using indicators to identify trends

If you have been in the forex market for some time, you would have come across this saying many times "the trend is your friend". Most of the time, traders who use this saying use it when they have made a loss in a counter-trading position.

Forex traders become very sad because they have lost a deposit, and again they were not part of the reverse trend movement which will have brought back the profits to the table.

In order for you to be successful with your trading, we encourage you take a look at some tecniques that will help you indentify when a trend is in place, with the use of indicators to drive your way to making reasonable profits from it. If you are a forex trader and you don't have a strategy inplace, then you might not be successful in forex trading.

The movement of prices of currencies have been shown to move in a trending pattern, because of long-term macroeconomic elements which moves these rates of exchange. These elements include interest rates, global trade imbalances, and many others.


Identifying a trend
With regards to the meaning of trend, it means a sustained market movement in a specific direction, which is either a uptrend or a downtrend. Many forex traders could give different and several meanings to what trend is. But to give a good meaning of trends, it is a predicted response to price at support/resistance levels which changes with time.

As an example, when there is an uptrend, the main visible feature is the rebound of prices when they reach levels of support, thereby creating new highs. In a downtrend, it means the same thing but in the opposite direction. As soon as you see this on a chart, it simply means there is a trend in place.


Now the major tool to identify this trend is trendline analysis. This tool (trendline analysis) is used to make an establishment of resistance and support levels for your market prices.

So in the next topic we will be talking about trendlines analysis fully, so that you can understand the use of technical indicators to identify such trends. They have worked for many forex traders, and it will surely work for you if you apply them correctly.

The application of these analysis are what guarantees you a smooth ride through your trend movement.