TraderABC,
This is probably the most intelligent and important question I’ve ever seen on a board. It is without doubt the most important question in trading.
It is also never asked and that’s the reason why 95% of traders fail at forex (equities are slightly more forgivng). They have no clue what a trend is. It appears so simple that everybody gives it glance, reckons “Oh, I get it...” and move on to years of failure. Everybody refers to “the trend” in almost every post they do, but nobody really understands it. Generally replies are “It’s a bunch of higher highs, or lower lows,” or “A trend is a sustained movement in price in a direction over a period of time.” And so forth…All that describes are aspects of the trend.
Sure, there are higher highs in a trend, sure there are sustained price movement in a trend, but they do not define a trend by a long shot. If they did we’d all know exactly when a trend changes. By definition if you know where a trend is, you know when it changes. A trend is much more complex than those simplistic definitions. Understanding them is the key to forex and all markets.
Unfortunately my experiences have thought me that I’m likely to be called a moron and other worse things for understanding my craft. Generally when I try to explain things to people it doesn’t fit “their experience” of forex, but when they can’t argue their position, because it’s not based on facts, they resort to the time honoured defence of the idiot, which is aggression. I don’t feel like the abuse anymore, so I’ll lurk and help out from time to time, but you’ll do well to explore your question very, very thoroughly.
I’ve tried to explain trends to people before, so I still have the images. Here’s a strong starting point for you.
Is the following an up-trend, down-trend or no-trend? And justify your view…
