Aside from the countless things you have to mind when you enter the Forex market, you also need to decide on when to enter a trade and when to just let it pass. There are Forex traders who rely on their ‘gut feeling’ in making this very important decision. But most of the time, the instinct that you have is based on two major emotions – fear and greed. When you become greedy, you tend to open more trades even though it is not already part of your trading plan. When you have fears, you tend to hold yourself back. In this case, traders tend to use more of their gut feeling when making decisions on MetaTrader 5.
But instead of gut feeling, it is highly advisable to use your knowledge when making decisions in the market. With the right use of trading tools, you can make a sound decision that will influence the outcome of your trades.
Trending Forex Market
Whenever there is a market trend, traders go on with the ride seeing possible opportunities to grow their profits. This market type is considered a trader’s paradise be it for a downtrend or an uptrend. One very important thing that you should consider with trends on Forex trading is that they will most likely go in the same direction, either it goes up or down.
It is crucial to identify the existence of this trend whether through the use of Fundamental Analysis, Technical analysis, or your gut feeling. You must always follow the trend just to make sure that it is properly applied to the trading system accordingly.
Sideways Forex Market
If trends perform great when in a trending market, this will be a different case when it comes to sideways movements. Sideways Forex Market shows no room to manipulate and no chance to allow the potential profits to continue running. Sideway markets also known as a range is a narrow band dedicated to price action.
Although a lot of traders are developing interest in range trading, this is because they look safer but after some time, they see a range and it’s too late to back out. Thankfully, there are now a lot of trading strategies that are made to be used by these types of traders. These are the strategies that outline the entry and exit rules.
Sideways markets and trending markets are just two of the broadest categories of the Forex market. These categories need to be recognized properly to be able to apply the right trading tools as well as the right strategies.
Technical Trading Tool To Be Used For Trend Following Traders
A very popular indicator that detects the presence of a trend in Forex trade is the Average Directional Movement Index. It reads signals of 20 or 25. Identifying the trend market gives an added advantage to trend-following traders since they can utilize it on the trend-following system. Meanwhile, in the sideways market, the use of Momentum Oscillators will be very handy. Pick the right trading platform such as MetaTrader 5 that has these indicators so you can gain some edge in the market.
