Trend vs Trading Range

Traders may get confused telling a trend from a trending range while it is very simple to distinguish both.

Trading range does not present a clear picture of the market direction. It makes it difficult to tell whether the market is heading up or down.

That's because traders could not find those familiar patterns of higher highs and higher lows (for uptrend) or lower lows and lower highs (for downtrend). What traders do see is randomness in tops bottoms formations order.

Let's look at trading range pic:


So what we can see is that trading range is actually a sideways pattern. It can be spotted often after a strong market move or near important support resistance levels where the market is trying to regain its strength to advance to the next level.

It is quite difficult to take right trading decisions in a ranging market. Therefore once spotted, it would be a good idea to walk away from charts for a while. Read more...

Trend Trading

Are you trading with a TREND?

To be consistantly profitable in Forex, traders should be able to identify market trends.
Why do you need to know about trends in Forex? The answer is simple: when you know trend direction you can increase your chances to profit from a market move by opening a position in the direction of the trend. Counter trend traders can be often punished by the Forex market.

How to spot a trend? Any novice trader should be able to see simple slopes and hills on the chart created by the market price, a trained trader is able to see certain chart patterns.
When the market moves it does so in a certain way, creating a pattern — a set of waves.
The price makes peaks and valleys, or they are also called Tops and Bottoms.


Higher tops and higher bottoms will tell Forex trader that uptrend is in place.
On the contrary, lower tops and lower bottoms suggest a downtrend.

A good clean trend in a well trending market is one of the favorite trading environments for all Forex traders to trade in.
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Trend Lines

Plotting a trend line on a Forex chart gives very valuable information.
Not only the trend line will show a current trend (direction) of the price move, it will also depict points of support and resistance levels for market price.

In addition, it will also help to determine good entry and exit points, best positioning for profit taking and placing protective stops.
This very simple, but yet quite powerful tool will be one of the crucial indicators of possible trend reversal (when market price starts move in the opposite direction).

So, shall we learn how to draw trend line to make it our good friend in profitable forex trading?

In the uptrend market trend line is drawn below the pattern formation; in the downtrend — above. (That is why when the trend is going to change our trend line will be crossed, which therefore will give us a signal that the price can start moving in another direction.)


In the uptrend, Forex trend line is drawn through the lowest swing-points of the price move. Connecting at least two «lowest lows» will create a trend line.

In the down trend, trend line is drawn through the highest swing-points of the price move. Connecting at least two «highest highs» will create a trend line.

A trend line confirms its validity when the price respects this line. The more «lowest lows» / «highest highs» the trend line contains, the stronger it becomes.


Another sample of drawing trend lines: main and inner downtrend lines.


Learn more about Forex trend lines in the Trend Line Book — Free Forex eBook.
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