The Forex market is generally known by its high liquidity and high volume of transactions occurring during almost all of its long trading week. These traits highly contribute to make the Forex market a trendy market with few trend-less periods during the full trading period.
But what does this mean to the Forex trader? Typically this groovy characteristic of the foreign exchange markets means that there will be lots of possibilities for the trader to find profitable trades during the day.
As you start researching forex charts you may realize that the market often display’s some extraordinarily familiar patterns of price movement, this is; trends; and you'll observe that once a pattern is established, it becomes the likeliest course of future price action until the market changes. Giving you a good prediction of what comes next with the currency costs.
There are 2 sorts of markets which should become very important for you to identify and understand; these are: trending and, the less frequent, trend-less markets. Each market type has two explicit patterns which you may also notice over a period.
A Trending market is generally accepted to be a steady, elongated movements in prices with less than a 45 degree angle with occasional pauses, profit taking, or resting periods.
In a Trending market, you will see two main and quite clear patterns:
Uptrends – A pattern of higher highs and higher lows.
Downtrends – A pattern of lower lows and lower highs.
There is also the less frequent sort of market, this is a Trend-less market with haphazard changes in price which are often steep (greater than 45 -degree angle) and cannot sustain and so must reverse. Although the movements can move many points in a short period of time, they're consistently and rapidly oscillating with the result that they frequently result in very little net price movement over a period.
In a Trend-less market, you will find these main patterns:
Choppy – A uncertain pattern of higher highs and lower lows.
Sideways – A narrow pattern of lower highs and higher lows.
While up-trend and down-trend periods will be offering fantastic trading results most of the time, troubled markets regularly create stop outs, this is they turn on your stops by constantly overshooting your projected resistance level but without never truly crossing too far from this level; while sideways markets produce for little in either direction making them hard to trade and to make any profit during these periods.
As always in Forex, your principal trading objective is to get into lucrative trades most of the time and a trending market is the perfect situation to find this rewarding trades by riding the trends till you make your target profit objective of the day.
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