Understanding the Timeframe and Trend Direction
Understanding the Timeframe and Trend Direction : There are students asking in the Instant FX Gains chat room about the current trend for a particular currency pair. Instead, I answered with another question, “According to the last 5 minutes, 5 hours, 5 days or 5 weeks?” Some traders may not realize that different trends exist in different time frames.
The question of what kind of trend exists cannot be separated from the time frame in which a trend is located. After all, trends are used to determine the relative direction of prices in the market over different time periods.
There are three types of trends when it comes to measuring time:
1. Primary (long term),
2. Medium (medium term) and
3. Short term.
This is discussed in more detail below.
1. Primary trends Primary trends last the longest, and their lifespan can range from eight months to two years. These are the main trends that can be easily seen on long-term charts such as daily, weekly or monthly charts.
Long-term traders who trade according to the main trend are the ones who pay the most attention to the fundamental picture of the currency pair they are trading, as the fundamentals will give these traders an idea of supply and demand on a larger scale. .
2. Intermediate trend In the main trend, there will be a counter-cyclical trend, and such price movements form an intermediate trend. This type of trend can last from one month to eight months. Knowing what the intermediate trend is is very important for position traders who tend to hold positions for several weeks or months at a time.
3. Short-term trends Short-term trends can last from a few days to a month. It emerges during an intermediate trend when global capital flows react to daily economic news and the political situation. Day traders are concerned with spotting and identifying short-term trends and therefore short-term price movements abound in currency markets, and can provide significant profit opportunities in a very short period of time.
No matter what time frame you are trading, it is very important to monitor and identify the main trend, intermediate trend and short term trend for a better overall trend picture.
To adopt an uptrend strategy, you must first identify the direction of the trend. You can easily gauge the direction of the trend by looking at the price chart of the currency pair. A trend can be defined as a series of higher lows and higher highs in an uptrend, and a series of lower highs and lows in a downtrend.
In fact, prices don’t always go higher in an uptrend, but still tend to bounce from an area of support, just as price doesn’t always make a lower low in a downtrend, but still tends to bounce from an area. of resistance.
There are three trend directions that currency pairs can take:
2. Downtrend or
1. Uptrend In an uptrend, the base currency (which is the first currency symbol in the pair) appreciates in value. For example, if the EUR/USD is in an uptrend, it means that the EUR is rising higher against the USD. An uptrend is characterized by a series of higher highs and higher lows.
But in real life, sometimes currencies don’t make higher highs, but still make higher lows. The base currency ‘bull’ takes over during an uptrend, taking the opportunity to bid the base currency every time it drops slightly, believing that there will be more buyers at each step, thus pushing up the price.
2. Downtrend On the other hand, in a downtrend, the value of the base currency depreciates. For example, if the EUR/USD is in a downtrend, it means that the EUR is falling against the USD. Downtrends are characterized by a series of lower highs and lower lows, however, similarly, currencies do not always make lower lows, but still tend to make lower highs.
The downward slope of the lower highs was formed by the base currency ‘bears’ who took control during the downtrend, taking every opportunity to sell as they believed that the base currency would fall further.
3. Tren sideways Jika pasangan mata uang tidak bergerak lebih tinggi atau lebih rendah, kita dapat mengatakan bahwa pasangan mata uang bergerak sideways. Ketika ini terjadi, harga bergerak dalam kisaran yang sempit, dan tidak menghargai atau terdepresiasi banyak nilainya.
Jika Anda ingin mengikuti tren, mode tanpa arah ini adalah mode yang Anda tidak ingin terjebak, karena sangat mungkin untuk memiliki posisi rugi bersih di pasar sideways terutama jika perdagangan tidak menghasilkan cukup pip untuk ditutup. menyebarkan biaya komisi.
Oleh karena itu, untuk strategi uptrend, kami hanya akan fokus pada uptrend dan downtrend.