Chart Basics (Trends)

When a collection of data points are plotted on a chart, you may start seeing the general direction in which a currency paid is headed towards. In some cases, the trend is easily identified.

For example, the chart clearly shows that the currency pair is rising over time:

On the other hand, there will be instances where trend is much more difficult to identify:

Therefore, more commonly, trends tend to operate in a series of gradually moving highs and lows. Thus, an uptrend is a series of escalating highs and lows, while a downtrend is a series of descending lows and highs.

Types of Trend

There are three types of trend:

Uptrends, Downtrends and Sideways/Horizontal Trends (The latter occurs when there is minimal movement up or down in the peaks and troughs). Some chartists consider that a sideways trend is actually not a trend on its own, but a lack of a well-defined trend in either direction.

Trend Lengths

Along with these three trend directions, there are three trend classifications that have to do with time duration in which the trend is taking place. A trend of any direction can be classified as either a long-term trend, an intermediate trend or a short-term trend. For forex trading, a long-term trend is composed of several intermediate trends. The short-term trends are components of both major and intermediate trends.