One of the most important things to know in forex trading is the trend. For this you have to know what a trend is and how to identify it. It is very simple, a trend is going up or down ( up trend or down trend). we can look at the chart ( I prefer the daily chart) and just see were the price is going, up, sideways(consolidating) or down. If the chart is consolidating, there is NO trend and we stay out of the trades. It is also handy to use the moving averages, this is a indicator and it can be found in the indicator browser of you platform. just set up 2 of them,
- 8 period Exponential moving average (EMA)
- 21 period Exponential moving average
( 8 and 21 day EMA's) in the daily chart.
You will notice that the 8 day ema responds faster to the chart than the 21 day. When they cross it usually means a change of the trend, BUT not always. The other method I'm going to teach you how to determine a trend, is to look for diverging EMA's ( as time goes on the distance between them becomes wider). If the 8 day ema is above the 21 day ema, and they are diverging, we may have a up trend, and if the 8 day ema is beneath the 21 day ema and they are diverging, we may have a down trend.
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| Diverging moving average (up trend) |
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| Up trend |
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| Down trend |
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| Consolidation (between the 2 green lines) |
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