Trading the forex market could be one of the most challenging tasks you have ever done. Why is that? Because trading is a mental game that will challenge you over and over again and having the resilience to overcome each obstacle that you face is one of the key factors to succeed. Today we want to focus on a key technical aspect of trading that any beginner should know.
Most of beginning traders manage to learn effectively the information required to trade. However, they do not manage to apply them effectively and even though they know a lot, result fail to materialize. One of the most important aspects that is not being understood is that there are two basic types of trending environments and we’ll dig into each one next.
Volatile type of trend
For this type of trend, the market is heading impulsively in a certain direction (up or down) and very important to note is the fact that there are minor or no pullbacks. That usually suggests that the order flow is heavily biased towards one side and the counter trend players are not being able to stabilize the price.
You can see below an example of a volatile-type of trend.
In our picture above we have the USDCAD pair and you can see the characteristics we have mentioned above. The market was heading impulsively on the downside, the bears were in control and the buyers did not manage to have significant impact on price.
Nonvolatile type of trend
On the other hand, we can have a situation where the market is heading in a certain direction but this time the momentum is not that high and there stronger corrections on the other side of the market.
Above we have a GBPJPY chart and you can see that the pullbacks were way more significant, compared to the other chart. The market was heading south but the bulls had some decent reactions all the way down.
This two are the types of trends you should know when trading the forex market. In our next material we’ll discuss how you should trade each category in order to generate profits.