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Home  >  Technical analysis  >  Forex trend analysis

Forex trend analysis

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The world of investment is flooded with excellent ideas of growing your money, but you are required to make use of geometrical patterns, diagrams, statistical analysis and other similar tools to reach a definite conclusion for efficient investments. The hugest trading market called forex is also not spared from in-depth study of market trends to earn profits and avert losses. Forex trend lines serve the purpose, as these patterns help to extract most rewarding information and plan your course of action for investing in various currencies.

Usefulness of Forex Trend Lines

The forex trend lines are helpful in introducing the most vital entity required by an investor and this entity is called information. How can one expect to make worthy investment, without adjudging the highs and lows existing in the market? Here is the list of most prominent benefits of forex trend lines:

- These lines help to depict the support and resistance levels, which are of great importance in deciding the sale or purchase of various investments.

- The trend lines help the investors to decide their entry and exit points to the forex trading market.

- These patterns make you familiar about nature of forex market; the sharp turns taken by trends and unwarned movements of different investments.

- In a nutshell, these lines fuel technical analysis of this investment market, which is certainly the most appreciable tool for making an investment.

Important Types of Forex Trend Lines

The forex trend lines are available in different popular forms, as summarized below:

- Simple trend lines consist of straight lines drawn vertically, horizontally as well as diagonally.

- Fibonacci trend lines have gained popularity in recent times and are excellent tools of understanding current market trends in forex trading. There are different variations of these lines in the form of Fibonacci Arc, Fibonacci Fan and Fibonacci Retracement.

- Pivot trend lines are drawn on the basis of fluctuations in the market during previous time frames.

- Speed trend lines are similar to Fibonacci trend lines, with the only replacement of Fibonacci numbers with calculations by thirds.

Drawing and Studying Forex Trend Lines

As you grow old in terms of experience of dealing with forex trading, you are able to play with forex trend lines. But, at the very onset of your investments in the forex market, you are required to seek the guidance of forex market experts in drawing as well as interpreting information from the trend lines. For instance, you must be capable of identifying the situation in advance, if the forex market is expected to move in an opposite direction. It could be a sudden turn and you must catch the signals generated by forex trend lines for this behavior of the market. Thus, initial understanding of these trend lines can provide benefit to an investor for rest of his age of investment.

It is the simplest and most convenient in all the technical analysis to draw a trend line on the forex chart. Upward trend:

Downward trend:

Sideways trend:

The market trend is consisted of three stages:

The first is the initial stage where the market trend is shaped up.

The second one is the developing stage where the trend is strongly kept as it is.

The last one is final stage where the forex market begins to suggest the next new trend on a certain turning point.

You can find the clear trend nearing to the final stage as long as you make use of the moving average, because it is coming later than the market movement. It might be fear that you would buy at the highest or sell at the lowest if you missed capturing the market trend accurately.

Forex Trend Lines Tools

There are many online websites, dedicated to introduce automated tools for drawing forex trend lines. These tools are part of automated software systems, available in large quantity over internet. You must evaluate all these systems on the basis of various factors and finally take a decision of choosing one of these tools. Make sure that you choose a reputed resource for accessing these tools.

For becoming a good player of the game of forex trading, you must consider trend patterns as right game gears. Also, keep your knowledge updated about various methods of drawing forex trend lines and switch over to a new system, if you find it more suitable. At a later stage, you will definitely experience the building up of your knowledgebase for forex trading trends and trend lines.

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