A trend is a Birdseye view of the market & a trend could be moving in either an upward, downward, or sideways trend.
You can use the trend line drawing tool on your trading platform/app to draw lines to mark where trends start and end on a chart.
What is an Upward Trend in Forex?
In an upward trend the green candles record higher highs, & red candles record higher lows. Think of it like you are climbing up a set of stairs.
In an upward trend, it is not unusual to see a red candle amongst green candles & this only means some early buyers are selling & cashing out their profit; thus, causing the price to fall momentarily.
However, even the red candles still record higher lows each time they form in an uptrend because they keep forming above each other.
What is a Downward Trend in Forex?
down trend
In a downward trend, the candles close at a lower price than their predecessor. In a downtrend, you tend to see red candles recording lower lows & green candles recording lower highs.
Occasionally you also see some green candles form in a downward trend because some short sellers are buying & cashing out their profits & this causes the price to rise momentarily.
- Whenever buyers in an upward trend begin to sell & close their trades with profit; a red candle appears
- Whenever sellers in a downward trend begin to exit the market with their profits by executing buy orders, a green candle appears.
When reading forex charts, it is important to identify trends as this will help you know whether to place a long or short trade.
As a rule of thumb, the trend is always your friend so it’s not advisable to trade against the trend.
For example, it’s not advisable to open a long trade when markets are falling; instead, you should open a short trade.
Trading against the dominant market trend is like swimming against the tide. It means you are being contrarian and acting opposite to popular opinion.
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