Forex Price Action Basics - Lesson 3: Trending Markets

 

Previous lesson, Japanese Candlesticks

 

Within the Forex market, price is generally doing 1 of 2 things; ranging or trending. When price is ranging, price is moving in a general sideways direction. When price is trending, it is moving in a general upwards or downwards direction.

 

In this lesson we will cover the basics of trending markets. The next lesson in this course will cover ranging markets. 

 

 

What is a trending market?

 

A trending market is when the price of a Forex pair is trending. When price is trending, it is moving in a general upwards direction or a general downwards direction. Sometimes this is referred to as a bullish market (general upwards direction) and a bearish market (general downwards direction). We could also say that price is up-trending or price is down-trending.

What does price look like when it trends?

 

When price is up-trending or down-trending, price is moving in one general direction. Below is a chart of the GBP/CAD Forex pair, you may notice that price is up-trending. Do you notice how price moves up and down (swings) but in a general upwards direction?

Each price movement higher on the uptrend is referred to as a push, swing, or rally. Each movement lower of the uptrend is referred to as a pullback, swing, or retrace. The illustration below should help you to understand this better.

Below is a chart of the EUR/USD, you should notice that price is down-trending. Do you notice how price is moving up and down but this time in a general downwards direction?

Each price movement lower on a downtrend is referred to as a push, swing, or sell-off. Each movement higher on the downtrend is referred to as a pullback, swing, or retrace. The illustration below should help you to understand this better.

Highs and lows?

 

Each price swing creates a swing high or swing low. These swing highs and lows can define a trend. When price up-trends, price creates a series of higher swing highs and higher swing lows. When price downtrends, price creates a series of lower swing lows and lower swing highs. To obtain a better understanding of trend highs and lows, please watch the video below...

naked price chart

Price moves higher - swing high, rally or push

Price moves lower - swing low, retracement or pullback

naked forex chart

Price moves lower - swing low, sell-off or push

Price moves higher - swing high, retracement or pullback

Watch this lesson...