It’s hard to figure out how the overall trading market will go over time. The thing about a market like this being so flexible is that it can be easy for the values of different currency pairs to change. But what can make the trading environment change on a whim so quickly?
First of all, when you start your Forex education, you should remember that the trading environment can change thanks to trending markets. These are markets where the price of a pair will go in one direction. The ADX is used to help you figure out where trends are going. The Average Directional Index will calculate the volatility of a trend. If the ADX is over 25, the price will be either trending or it will already be a trend. This can help you determine if something is changing quickly in some manner.
Range-bound markets occur when the price goes between two particular prices over time. There’s a high and a low that might be seen over the course of weeks or months and a pair might keep on going towards either high or low but it won’t move off. The range might appear to be steady for a while. This is a sign that the market is bound to a certain range and the odds of it going above or beyond a certain price is extremely unlikely.
Another important aspect of FX learning is the question: what happens when the price goes outside of a range? A breakout will entail the value of a pair going out of a particular range.
False breakouts can also occur when the value goes out of a range for a period and then goes back into the range. A fake breakout can last for just a few days in some cases. Breakouts are often caused by dramatic changes in investor sentiment. They can come about because people are more interested in certain pairs or they think that pairs might not be as valuable or worthwhile for investment purposes as originally expected.
Fakeouts occur when a sudden move occurs outside a range. That is, the value of a pair might change substantially within a trend and then go back to the old trend a few days later.
You have to look at dramatic changes within an investment to get a clear idea of what is happening with a pair. Note in the example you see above that a fakeout can quickly sneak out of a range even by the smallest point. This might be a good sign of a time to buy or sell a pair depending on where it’s going.
Retracements occur when a price moves temporarily against a trend. The price will typically return to continue the trend after a bit. This typically occurs after massive changes on the market. The fundamentals of a trend will not change all that much here.
A reversal is a little different from a retracement in that the trend will change altogether. An upward trend can go down, for instance. The reversal point can be a spot between trends. You can always use the Fibonacci levels created by a trading platform to identify such an event. For more information on changes in the trading environment, please visit Forex education section at ForexNewsNow.