Forex Trading Library

Trend is your friend!

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Trend is your friend!

A trend is an established directional movement in an exchange rate observed over time. Many successful forex traders consider the trend to be their best friend as a trader, so they avoid trading against such a trend by only establishing positions that will profit if the trend continues. An upwards trend in a currency pair can be identified on an exchange rate chart by a series of higher highs and higher lows, while a downwards trend involves a series of lower lows and lower highs. Trend lines can be drawn between successive lows or highs, and parallel trend lines create a channel pattern.  With respect to the indicators used in technical forex analysis, a popular and important trend indicator is the Average Directional Movement Index or ADX developed by J. Welles Wilder.

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