Technical analysis in the forex market

Let's draw a trend line on the chart

It is the simplest and most convenient in all the technical analysis to draw a trend line on the forex chart. So, almost all the players in the world capture where the trend line to be every day. Go ahead to make a line on the chart. In case of up trend, you can make a line with connecting some bottoms upward, as shown in below.

Up trend

In case of down trend, you can make a line with connecting some tops downward, as shown in below.

Down trend

Three stages of trend

You can also make sure of the market trend using the moving average on the chart. It is, however, a little difficult to trade forex with trend following at any time and make money from the forex market. Generally, the market trend is consisted of three stages. The first is the initial stage where the market trend is shaped up, the second one is the developing stage where the trend is strongly kept as it is. The last one is final stage where the forex market begins to suggest the next new trend on a certain turning point. You can find the clear trend nearing to the final stage as long as you make use of the moving average, because it is coming later than the market movement. It might be fear that you would buy at the highest or sell at the lowest if you missed capturing the market trend accurately.

Chart Three stages of trend

This concludes that we should capture the market trend at the initial stage in the forex market, but it seems quite hard to find it out as you think. It is because the older trend continues just before the new trend is born out as the forex market keeps older status.

You can find the turning point of the market trend to some extent by referring to the patterns of tops and bottoms, but it does not necessarily ensure that the new trend should be generated. It needs attention that a certain box range trading continues after the big wave in line with the market trend.


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