The simplest way in Forex trading system is trend. Maybe you ever heard about these statement " Follow the trend ", "trend is your friend" and etc. But what is trend ? You will get the answer if you see in this following picture.
With the picture above, we will understand the market trend in Forex trading. Trend in Foreign exchange market is divided into 3 parts, bullish trend or up trend, bearish trend or down trend, and sideways trend. As a forex trader we should know about how to identify the trend in the market to make trading decisions. And there are many technical indicator to help determine the market trend. To identify the market trend we can use the trend technical indicator, moving average indicator, trend line indicator, bollinger bands, parabolic sar indicator and etc.
Momentum completed discussion about the trend, so what is the momentum actually ? In the simplest word, momentum is a strength from a trend. We must not only understand about trend direction in the market but we should understand about momentum too. With momentum we can easily to know the strength of the market trend. For an example, market is in bullish trend and we open buy position but not long after we open trading position the market is turn around or reverse into bearish trend or down trend. Without momentum analysis we could stuck with sell position in bottom or stuck with buy position at the top. Before we stuck in the middle of the market trend, it would be better if understand about the strength of the market. We can easily identify about, "is it strong enough to keep the position in trending market ? or "is the market in the reversal pattern ?
There are so many forex indicator that can help you to determine the strength of the market trend such as Average directional movement index ADX, Relative Strength Index RSI, MACD Moving Average Convergence Divergence and etc. In this point I hope you already understand about the basic of Forex trading, it is about when to open buy position and when to open sell position. About how to read and interpret the technical indicators in Forex trading, we will discuss in the next article.
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