Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

What is Trend? Technical Analysis

Forex Educational Video Series

Author: Andreas Thalassinos (BSc, MSc, MSTA, CFTe, MFTA), Head of Education at FXTM.

What is Trend?

You may have already heard popular phrases like “The trend is your friend” and “follow the trend”. But, what is Trend, exactly? In its simplest definition, Trend means the direction of the market. In more technical terms, Trend is the direction of successive tops and bottoms. There are three main types of trends: uptrend, downtrend, and sideways. During an uptrend, there are higher tops and higher bottoms. On closer inspection, one can notice that each top is higher than the previous top and also each bottom is higher than the previous bottom. An uptrend is likely to continue in the same direction.

In a downtrend, there are lower tops and lower bottoms. On closer inspection, one can notice that each top is lower than the previous top and each bottom is lower than the previous bottom. Just like uptrends, the downtrend is likely to continue in the same direction. 

When the market is not trending, it doesn’t move upwards or downwards. Instead it moves sideways. On closer inspection, one will notice that in a sideways movement there are approximately equal tops and equal bottoms. Another way of defining this sideways movement is by calling it range. Unlike uptrend and downtrend, a range is more likely to break out either above or below the sideways pattern.

Now you know why trend is your friend! Until next time, traders! 

Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Risk Warning: There is a high level of risk involved with trading leveraged products such as forex and CFDs. You should not risk more than you can afford to lose, it is possible that you may lose more than your initial investment. You should not trade unless you fully understand the true extent of your exposure to the risk of loss. When trading, you must always take into consideration your level of experience. If the risks involved seem unclear to you, please seek independent financial advice.

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