The Forex market is well-known for its high liquidity and large number of transactions that take place over the majority of its extended trading week. These features significantly contribute to the Forex market being a strongly trending market with few trend-less periods during the trading day.

But what does this imply for a Forex trader? Essentially, the currency markets’ trending nature implies that there will be lots of possibilities for traders to identify winning transactions during the day.

When you first start looking at forex charts, you’ll see that the market typically shows certain fairly recognisable price movement patterns, known as trends, and that once a pattern is established, it becomes the most likely path of future price action until the market changes. Giving you an accurate estimate of what will happen with currency prices in the future.

There are two sorts of markets that you will need to detect and understand: trending markets and less frequent, trend-less markets. Each market has two distinct trends that you will see over time.

forex market

A trending market features regular pauses, profit taking, or resting periods, as well as continuous, lengthy price movements with less than a 45 degree angle.

You’ll see two unique tendencies in a trending market:

A pattern of higher highs and lower lows is classified as an uptrend.

A succession of lower lows and lower highs is considered a downtrend.

There is also a less common type of market, which is a Trend-less market with irregular price movements that are frequently steep (more than a 45-degree angle) and cannot maintain and must consequently reverse. Despite the fact that the movements can move many points in a short period of time, they fluctuate often and quickly, resulting in relatively little net price change over time.

In a market with no trends, you will see the following primary patterns:

Choppy – An irregular pattern characterised by higher highs and lower lows.

A narrow pattern with lower highs and higher lows is known as a sideways pattern.

While most up-trend and down-trend periods produce excellent trading results, choppy markets frequently create stop outs, in which they activate your stops by constantly overshooting your projected resistance level but never crossing too far from it; and sideways markets produce little in either direction, making them difficult to trade and profit from during these periods.

As is always the case in Forex, your main trading goal is to get into successful trades the majority of the time, and a trending market is the ideal setting for finding lucrative trades by riding the trends until you reach your daily profit target.

Summary: There is one sort of market that you must recognise and comprehend in order to become a successful forex trader. This is a hot market.