Do forex market trends even exist? Market trends that can easily be picked up and be used to make a large amount of money over a short period of time? Day traders will no doubt say there is no such thing – the market is 100% unpredictable over any period longer than one day. Swing traders and long term traders will disagree.

Day traders make or lose money in a very short period of time. For them a long term trend would be a price movement that lasts from 10:00 to 12:00 in the morning. Day traders often buy and sell forex within the space of a few minutes. If you consider the fact that you have to pay commissions on trading this type of market is best left to people who know what they do. However, because day trading is quite exciting one often finds that beginners are attracted to this type of market. They very often lose a lot of money within a very short period of time.

Another type of trader is the so called swing trader. Swing traders do not trade as often as day traders. They wait for a medium term trend in the market, and then either go long or short on a particular currency. They will stay in the trade for as long as the trend lasts, and try to get out just before it reverses. This of course is more of an art than a science, since there is nobody that can actually predict when the market will turn around. External factors can cause it to turn around within a matter of hours.

The third category of trader is the long term trader. They are not really traders at all, but should actually be called investors. They would only buy a currency if underlying economic factors (fundamental factors) indicate that the currency is on a long term upward trend. If the reverse is true, they would sell it (or go short in trading lingo). They do use technical indicators from time to time, but then over a much longer time frame than either day traders or swing traders.

Swing traders often use both technical analysis and what is called ‘fundamental analysis’ to make buying or selling decisions. Fundamental analysis looks at all the underlying economic factors that influence the movement of a currency. One example is inflation. When inflation of one country is higher than that of another, the currency of the first country will depreciate to adjust for this – all other things being equal!

Long term traders prefer to call themselves investors, and most of the time they only look at fundamental factors to make buying or selling decisions. Banks and other investment houses do, however, often make use of basic technical indicators like the six month moving average of a currency.

There are a number of different chart types being used by traders. The simplest is the line chart, which basically just connects the closing prices to each other. A favorite of many traders is the so-called ‘candlestick’ charts. A candlestick chart shows both the opening and closing prices, and the highest and lowest prices for the day in a colorful bar type chart. Bar charts only shows the lowest and highest prices of the day.

Forex market trends is a subject that often causes heated debate among traders. There are as many experts as there are traders. Some swear by “the trend is your friend”. Others do quite well with buying a solid currency like the Euro when its price is dropping, because they know it will sooner or later rise again.

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