Learn key strategies that every trader should know. Watch the video with TraderNick as he goes over straightforward techniques that will help you filter out the “noise” and spot the powerful forex trends.
Spotting a trend is one of the most important skills a trader can have, and it doesn't have to be complicated. In our latest video, Nick Syiek (aka TraderNick) breaks down two key and straightforward ways to identify market trends.
Whether you're new to trading or looking to sharpen your skills, this video is helpful to elevate your forex trading techniques. Learn how to filter out the market "noise" and spot the powerful trends.
Spotting market trends
Method 1: Using moving averages
- Simple moving average (SMA): Using an SMA allows you to smooth out price data, making the overall trend easier to see — unlike, for example, a candlestick pattern, which, although often a popular approach, can be very erratic. The SMA smooths out what the price action looks like, allowing traders to clearly see the general trend.
- Dual moving averages: A popular approach among traders is using two moving averages — for example, a 20-period SMA and a 50-period SMA — to confirm a trend. A moving average crossover occurs when the fast-moving average crosses above the slow-moving average (a bullish signal) or below it (a bearish signal), providing a stronger indication of a new trend.
Limitations: Moving average crossovers work best in strongly trending markets, and can be less reliable in sideways or "ranging" markets.
Method 2: The higher highs & higher lows principle
- Uptrends: In an uptrend, the market consistently creates a series of higher highs and higher lows. This is a classic indicator of a bullish trend.
- Downtrends: In a downtrend, the opposite occurs, with the market forming a sequence of lower highs and lower lows. This signals a bearish trend.
The big picture: This method helps you analyze the market's overall structure and direction without relying on technical indicators.
This article is for general information purposes only, not to be considered a recommendation or financial advice. Past performance is not indicative of future results. It is not investment advice or a solution to buy or sell instruments.
Opinions are the authors; not necessarily those of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors.
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