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It took me a year to understand what the "trend" meant and how to enter trades when the price was "trending".
My biggest hindrance in spotting the trend was using support and resistance, trend lines, and indicators. I couldn't see the price move by itself. I thought if I had all these tools and indicators it would give me some sort of edge in the market but it didn't.
It was only when I cleared my chart and watched how the price fluctuates alone was when I understood I could become a great trend trader.
The Downtrend
A downtrend in the forex market means exchange rates are decreasing and you want to be the seller. In order to see price decreasing, you must know what exchange rates are.
How to identify the downtrend?
How to become the seller?
What are exchange rates?
You trade the Foreign Exchange Market. The word exchange means something has to be swapped.
Let's use a currency pair that is trending for the rest of the blog( chart below)
EURGBP is in a downtrend. Exchange rates are the numbers you see on the vertical scale on the left-hand side. At any moment wherever the price line is, people who use the Pound currency will pay for the Euro. It's an actual exchange.
For example, the price is trading at 0.84050. This means to buy 1 Euro will cost 0.84050 pounds. Basically, you'll spend 0.84 Pound cents to buy 1 Euro. Talk about a discount!
How To Identify The Downtrend?
Trend trading can make you a lot of money when done right! Let's identify a trend together.
Most traders on Youtube will have you thinking you need to go far to the left of the chart to identify the trend. FREAK THAT!
You just need two highs and two lows, if that. Let me explain.
A downtrend consists of lower highs and lower lows. By only identifying two of those you can quickly get the gest of who has control. In the chart example above I've identified only one lower high(0.84781) and two lower lows(0.82845 & 0.82031).
The lower lows give the downtrend away, but remember lower lows and lower highs are a pair. You cannot have one without the other.
When price makes a new lower low this is the time to wait for a pullback so you can sell high. In this example, it would be below the last lower high at 0.84781. See how quick that was?
How To Become The Seller
Becoming the seller is quick and easy. Identify two lows and highs(one lower high can be enough), and sell below the last lower high.
Full EURGBP Analysis: https://www.tradingview.com/chart/EURGBP/vT0ELwmT-EURGBP-Can-She-Still-Push-Down/
Did this quick "How To" help? Let's discuss more below if you have any questions or concerns.
You can also learn more about trend trading in my ebook that dives more into trend trading the most repeated 4 price action candlesticks.
Happy Trading,
Shaquan
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