To understand how to choose the best Forex trend indicator we first have to look at why the trend direction is important, and how to properly classify a trend.
Trading with the trend is widely known as the “safest” way to trade, because you are going with the momentum of the market. This gives the typical trader a sense of security because they are moving with the herd instead of against it.
However, just because you are trading with the trend does not mean you are exempt from using proper money management and disciplined entry points. Trends change direction often, especially in the Forex market.
Defining A Trend
By definition a trend is created when the market makes higher highs, or lower lows. The example below shows a downward trend characterized by its lower highs, and lower lows.
Easy enough right…
Viewing Trends On Multiple Time frames
Where defining a trend starts to get tricky is when you zoom in, or zoom out. Other data becomes available which may give you mixed signals as to whether the trend direction is up or down. It is often referred to as having “trends within trends”.
So if we we’re looking at just one currency pair, we need to take into consideration the 5 primary time frames like the example below.
You can see by looking at the 1 minute chart that it is in an apparent up-trend, as soon as you start to back out to the longer time frames you can see that it is actually in a longer term down trend.
So ultimately the best Forex trend indicator would give the trend direction for:
- Short Term Trend direction
- Medium Term Trend Direction
- Long Term Trend Direction
By knowing the trend direction for theses these time-frames you can understand the big picture of whats going on in the market and trade accordingly.
Creating The Best Forex Trend Indicator
That is why the FxPM Software is designed to think in terms of multiple time-frames. It allows the trader to easily see the big picture of what’s going on in the market at a glance.
In the video example above you can see that just by glancing at the FxPM Matrix Software you’re able to confirm the trend direction in a matter of seconds.
Traditionally, you would have to analyze 5 different charts just to come up with the same conclusion.
Entering & Exiting A Trending Market
Once the trend has been defined its a matter of choosing the safest entry point and knowing how much profit potential you have in the trade.
With the FxPM Matrix Trend Indicator you are presented several options for entering the market depending on your appetite for risk.
If you’re a more aggressive trader you can take entries more frequently, where as if your a passive trader it is best to be patient and let the market pull back into a deeper zone giving you a better Risk: Reward trading opportunity.
When you’re looking to define a trend there is more too it than simply choosing any one time frame. Trends are cycles in the market, and depending on they time frame you’re viewing you will see a different cycle.
Having a tool that will instantly show you trend direct in multiple time frames gives the trader a huge advantage over the typical trader that is shuffling through charts trying to make a decision.
In the 8+ years I’ve been trading the FxPM software has constantly proven to be the best Forex trend indicator I can find.
I’d like to hear your feedback, what trend indicators do you find useful, and for all of our FxPM Software users out there, what advantages do the Trend Indicators give you?
For over 8 years I have been trading Forex and working closely with Armando Martinez, the Founder and creator of The FxPM Software to develop FxPM. It is our goal to develop a Forex Software that not only simplifies trading decisions but also delivers institutional performance to the retail trader.