I understand upward trend is a buy- I want to buy low and sell high(peaks). But for some reason I can’t wrap my head around downward trend-a sell.
What do I have to sell if I haven’t bought?
And do I buy low, sell high(peaks) or buy high, sell low?
Hopefully I’m making sense. One thing that helps is understanding that I want pips.
In the forex market, when you buy in an uptrend you’re really just placing a bet that the market will rise. Similarly, when you sell in a down trend you’re placing a bet that the market will fall. The amount you bet is defined by the lot size you utilize.
This is different from “shorting”, eg. in the stock market. When you short your broker loans you the stocks to short and you would “cover” your short when you buy the stocks back at a later time.
Agree with Quadpip. Forex has currency pairs that are either bought or sold. For example, if you’re buying USD/CAD, you’re expecting the USD to follow an upward trend at the expense of the CAD. And a vice versa downward trend when you sell the USD.
What is important to realise, is how high or low you think the market price will reach. There is no such scenario where buying low would guarantee an upward movement, or where selling high would guarantee a downward movement.
As a trend trader, I would definitely follow a trend until it breaks out because I cannot second guess what the market is going to do. And in my opinion, all of the overbought and oversold indicators are worthless without additional confirmation, e.g. by using the MACD histogram to determine whether the trend is weakening with a continuing reduction in bar size - that’s an excellent signal, IMO.
Down trend is noted with lower lows and lower highs. If you see such a pattern it clearly indicates upcoming downtrend. So you can start short selling at this point.
@QuadPip has it spot on. If youa re trading CFDs rmember you never hold the currency in question unlike stocks. So it really is just as “bet” as they say. Much like betting on a betting exchange where you back low and lay high in an uptrend and do the reverse if you feel a price is going to come in.
When you see lower lows and lower highs, it shows a downtrend. Such patterns clearly indicate an upcoming downtrend.
There is no way to avoid losses completely. No matter how hard you work, there will always be instances when you will lose money. Take it positively and keep moving. That’s the ultimate mantra that can help you make the most of the market situations.
Hello Amym and let me try to help you out here. In the trading industry, we usually refer to a downward trend as ‘Bearish Trend’. So this basically means that there’s a fall in the prices of the stocks or you can say that there’s an overall fall in the market. Now, you can still make money here by selling a declining stock or assets as we call them timely.