Identifying the Market Trend & Identification Systems
The accurate recognition of a strong Forex market trend can lead to the accumulation of major trading profits. Forex currencies trend very well, in long directional moves. During these extended Forex trends, the likelihood of making profitable trades is significantly increased.
Distinguishing Market Trends
There are two main trend types: the (i) primary, and the (ii) secondary trends:
(i) Primary Trend
The Primary Trend is the major trend in the market. It can last for weeks, months, or even years, and includes several short-term secondary trends. According to the Dow Theory, the primary trend has a strong impact on the secondary/minor trends within the same market.
The long-term goals of key central banks, and especially the FED, play a major role in the creation of these primary trends
(ii) Secondary Trend
A secondary trend is less significant than a primary trend and can last for hours, days, or weeks.
These secondary trends are usually moving in the opposite direction of the primary trend. That includes short-term corrections, take-profit periods, or bear market rallies.
Secondary trends can also occur in flat markets. This means moving towards the boundaries of a specific range. When the price reaches the upper/lower boundary, the market retraces in the opposite direction, and a new secondary trend commences (ranging market).