How Can Traders Identify Trends in the Forex Market?

The process of identifying trends in the market is a highly crucial activity as it has high relevance in technical trading. Technical Indicators are metrics that are used to indicate the trends and directions of the market based on the past patterns. Their usage can help traders extrapolate the trends and forecast future movements. For traders who are engaging in forex trading in Nepal, using these trends indicators can help them trade without depending on market news.

These Are The Significant Trend Indicators:

Highs And Lows

Following the highs and lows of a trade can help forex traders identify whether their trends are gaining in terms of momentum or losing. Analyzing the candles can help traders understand the points of entry and exit and discern the price point where a trade may go up.

Moving Averages

The moving average convergence divergence (MACD) is an indicator used to signal the trend and momentum behind a security. It comprises two exponential moving averages (EMA), each covering two different time periods, which help to measure momentum in the security. This is valid for short-term forex trading.

The ADX Indicator

ADX, short for Average Directional Index, is a trend indicator used to measure the strength and momentum of an existing trend. It indicates the momentum and directional strength of a trend. The value of the indicator defines its upper trend or the lower trend. 

Line Graph Method

Line graph is a very simple, yet practical tool that allows the forex trader to look at the bigger picture of the chart. The line graph helps traders identify the overall trend along with specific details such as price action and number of pips gained. 

Technical indicators such as the ones mentioned above are useful in identifying the trends and the direction of the market. They help traders gain insight into the supply and demand of securities and use the information to place informed positions. For novice traders who are still getting the hang of such indicators, partnering with reputed forex brokers in Nepal such as WesternFX can be helpful in the long run.

Ways to Develop a Successful Trading Plan

If one has been a part of the forex trading scene in Nepal for some time, then it is likely that they would have been told that success in online trading is dependent on the plan. While this statement is valid, only part of it holds true. Not all plans can be successful. If that wasn’t the case, then hundreds of forex traders would turn millionaires each year. So, where do these plans fall short? This article discusses how traders can develop plans that ensure a high chance of success.

There are a few steps that traders need to follow if they intend to make successful plans.

Initial Questions to Answer

Traders should first begin their planning by answering the basic questions behind their activity. These questions should ideally help them identify key components of their trade activity such as initial investment, style, profit targets, choice of broker, etc.

Weighing the Risks

This is the second important consideration for traders to plan. When devising a forex trading plan, traders must also consider the risks they can face and prepare for the same accordingly. This is important as safeguarding the investment should be awarded the highest priority and any risks that can impact the investment should be considered in the plan.

Writing the Trading Plan

After understanding the various tenets of trading, forex traders should document their plan so that they can refer to it during the process. Information about which pairs to trade, the maximum risk, permissible loss limits, entry and exit strategy, position size, etc., should be included. They should include their risk management tools such as Stop-Loss and Trailing stops into the plans.

Reviewing the Plan

After writing of the plan, the next logical step is to review it. This is because not all trading plans are fool proof. They may have certain discrepancies in them. It is vital to test the trading plan on a demo trading account for some time and review the results. This can help traders iron out flaws in their plans.

Following the aforementioned steps can help traders develop an elegant trading plan that guarantees success in online trading in Nepal. However, for beginners developing such plans from scratch may be a daunting endeavor. It is advisable for them to approach reputed companies offering forex trading services in Nepal like WesternFX to develop a strong trading plan.