A Forex Trend has a significant importance in technical analysis the main assumption of which is that market participants make group decisions in the result of which the advantageous price movement remains for some time. It is not usual for currency prices to rise directly up, and they do not drop down immediately as well. It is typical of them to recede or progress, before following the Forex trend direction. Forex trends differ in direction and duration length.
According to their duration Forex trends are divided into three main groups: major, intermediate and minor trends. Major Forex trend can continue up to three weeks. Intermediate currency exchange trends can continue up to three months and the minor trends duration can be less than three weeks. In order to observe major trends the daily charts are the most comfortable, intermediate trends can be studied on hourly charts, while minor charts should be viewed on 15-minute charts. In consequence it is notable that the major trends are formed from the power and effect of the intermediate trends, while the last is formed through the power and effect of the minor trends.
The direction of price movement can be advantageous in case it prevails in upward, downward or sideways trend, or even when it has no perceptible trend at all.
- When each currency price power gets to the higher point than the one before it and in the meantime each currency price effect impedes at the point higher than the preceding reaction, the upward trend comes forth. It should be noted as well that the upward trend line obtains positive slant when it connects the lower lows.
- In case of a downtrend every price power arrives at a lower level than the one before it and every price effect ends at the point lower than the previous response.
- What refers to the sideway trend, both the price power and the effect do not significantly surpass their prior equivalents.
- In case of upward trend the power of supply is smaller than the power of demand, which makes the investors buy the same currency at a higher price. Still, existence of a fracture in the trend line can signal about trend weak point, which on its turn is a signal to sell.
- Contrary to upward trend, power of supply is greater than demand while the sellers assent to trade on lower price for the same currency. The downward trend will persist until the fraction in the trend line signals the buy time.
- When approximate stability is maintained between the supply and demand forces and the price continues to stay in balance indicated by trendlines, then we deal with the sideway trend. The trend continues until the line breaks and either supply or demand power dominate.