Last Updated on: 20th April 2024, 10:10 am
What to do when there is a downtrend in forex trading
A downtrend in forex trading is very essential and it is made up of consecutive lower moves in prices and lower highs. In general downward movement of the curve, describes a downward movement. As a forex trader, I used this downtrend to improve my progress in the trading industry. I will share what you should do when there is a downtrend in forex trading.
Many forex traders are very quick in selling when there is a downward trend. In most cases, forex trades end up making losses when they close their positions when there is a reversal trend.
Where there is a downtrend in forex trading, you need to understand the forces behind the downtrend. Just like we discussed about the uptrend, you need to understand the forces behind the trend so that you make the right decision. For instance, you can check on the factors that might lead to a downtrend. You can check on the news for each country concerning economic development and political utterances since they are very fast in influencing forex trends.
News about GDP and GNP are very essential to forex traders because they are the pillars of an economy. When a country is performing poorly due to political goodwill as well as investors, it can impact the development of the nation making it have an uptrend.
In most cases, I never knew how to approach it and I was doing a traditional way of spot trading. I could just look at a downtrend and conclude that there are very many sellers in the market. So, I could just sell and in the short run, I ended up making losses due to reverse change.
So, I could go for a long-range uptrend in forex trading so that I can make a profit from any slight reverse in the downtrend. So, the most important aspect of the downtrend for me was to identify a time when I could get a reversal. I usually utilize trend lines so that I can come up with a possible change in the trend.
I can say that every time a downward trend has always provided me with an opportunity to profit from selling asset prices. As I trade, I know that when I buy an asset once it has failed to create a lower peak and trough is the most effective way for me to avoid large losses that result from a change in the trend.
Assuming you don’t know what to do with the downtrend, you have to look for higher prices as you compare with the previous. When you find that the current high prices are lower compared to previous ones, then it is an indicator that there will be more lower prices (downtrend) because buyers as no longer buying. Also, you should use a previously high price where you can set your risk of stopping losses.
Lastly, you should know that trends are temporary and in order for you to make a fortune out of your opened position. You should take profits when prices flush beyond the previous low and stop a loss the instant when an uptrend starts.
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