What You Should Know About Trading Trends

First of all, in a trading market sometimes the numbers go up, sometimes they go down. If the movement continues for a period of time in one direction, that is called a trend. These trading trends are very important to make you decide to buy or to sell, when to do it and what to expect. These trends are not always crystal clear for the trader. In fact, most of the times, they are really messy. In order to understand what the market is telling you, a little analysis would be welcomed. If the trend is going up, that is called bullish; if it goes down, it is called bearish. On a graphic that you can watch in any type of market there are some highs and lows that you will notice. Even in a bearish trend there are some highs, but they are called lower highs, because are always lower than the highs before them. In a bullish trend there are some lows too, but they are called higher lows, being always higher than the ones before them.

In a real trading market people have difficulties to interpret trends. Sometimes, if the market makes a loop, people get confused, afraid that the trend is about to change and make a hasty move. That’s the main reason why using trends for beginners is not a very wise thing to do. When you do not have a lot of experience, reading the market changes in advance is almost impossible. In some markets, like FOREX, even experienced brokers can make mistakes because unexpected events can change very quickly and without notice the present trend.

If you decide to use trends in your trading activity, you should know that the safe thing to do is following the trend set by the market and not by trying to predict it. Most traders try to make a prediction on the next trend the market will have. This can be a very rewarding thing to do, from the emotional point of view, because if you are right, you’ll feel a great satisfaction. Unfortunately, this method has proven to bring more loses than gains over time.

So, if you want to use trends in your trading activity, remember two important things: follow the ones already there, as you’ll know for sure what to expect from them and don’t confuse a trend with a temporary market tendency. Learn to be patient and observe several weeks in what direction the market is going before making your move.

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