There are some price movement trends that you can follow to predict the market correctly. The price movement of a currency is the movement in one direction or another. The trend can be upward or downward, but it cannot reverse its course.
What are price movement trends?
Price movement trends are the general direction of price over a period of time and they can be divided into three main categories:
– uptrend: it occurs when the prices of a certain currency have been on the rise for a significant period; uptrends generate momentum in prices up to a certain point before they break down. Traders can take long positions to take advantage of the uptrend.
– downtrend: downtrends generate a falling trend until an uptrend is witnessed, which is usually when there is no more room for further declines. Traders can make money from a downtrend by selling or shorting an asset class in the forex market.
– sideways: it occurs when there has been no movement for some time but are still supported by strong volume activity from buyers. The price of a currency pair may remain stagnant meaning it will neither reach its highest prices nor will it reach the lowest prices.
The different types of trend trading strategies
There are different trend trading strategies that you can use to make profits:
- The MACD Trading Indicator: it is a technical indicator that is used to identify changes in the strength and direction of a trend in price;
- The RSI Trading Indicator: it is a technical indicator used to gauge the strength of a trend in price;
- The ADX Trading Indicator: it is a technical indicator used to assess the strength of a trend in financial markets.
The theory of retracement
Retracements are a technical analysis tool that shows the shape of price movement. This is a chart pattern that appears when prices fall below or rise above previous highs and lows. A retracement can be reversed within a day or two, so it’s important to examine your trade plan before entering an order.
Fibonacci Retracement tool is the most popular method of calculating a retracement. It uses numbers derived from the golden ratio. The most common form of retracement is the symmetrical triangle. This pattern appears when the price is stuck between two converging trendlines, making it difficult for buyers and sellers to agree on a price. When this happens, neither side can gain an advantage over the other.
A retracement is when price drops below its previous high point and then bounces back up again, forming a relatively small but powerful recovery that lasts for several days or weeks before resuming its descent into new lows. This period of recovery is what traders wait for.
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