There are number of basic skill a trader needs to have. Identifying the trend is one of the most important ones. The goal is to identify which direction price moves and make trades along that price trend in Forex.
The beauty of the trend identifying skill is that anyone can learn it very quickly. Since it is easy to point the direction of the price movement the identifying the trend is also quite simple. Any time frame will work. However the trend is most clearly seen on higher time frames.
Here is a way to learning to identify the price trend in Forex. One of the techniques to identify a trend is to identify the local maximums and minimums of the price. Those points sometimes are called swing high and swing low point. A line connecting those points basically will give you an idea about the trend.
Another phenomenon that called sideways market. You can see it when the price moves sideways between support and resistance levels without breaking out of them. Therefore there is no trend upwards or downwards.
A good part of the such horizontal movement of price is that sooner or later it will break out the support or resistance. If it breaks the support it will create a downtrend. If it breaks the resistance price will go in up trend. Either way it is a good opportunity to take a trade.
Those traders who like taking the scalping trades use such sideways price movements. The idea behind such trades is to enter at the support or resistance level and exit with a small profit when price reaches the opposite level. Then do the opposite trade when price reverses.
No matter what strategy you will base your trading decisions you need to test your trading system on past data. The next step is to forward test it on a demo account or even on a small account with real money. That will give you clear understanding of the risks involved with trading certain strategy.
As I described you before identifying the trend is not a hard task. Anyone can learn it and make money trading currencies. On the other hand the hardest part is to be objective while identifying the trend or any other parameters of the price. It seem not that easy when it comes to real hard earned money.
Very often it’s not easy to take a trade when there is a clear trading set up has formed. For other traders it’s not easy to stay away from the market for longer periods of time and they jump into it even though the trading setup was not formed. Therefore if you want to become a successful Forex trader you need to develop self control and objectivity.
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