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Trend Days

Wednesday, 16 November 2011 21:33

With so many different trading strategies for forex, it can be easy to dismiss Trend Days as just another fad to take the fancy of over-fussy investors. However, the concept has taken a real hold on the market and many top traders have incorporated the principles into their trading plan.

Trend days are slightly different to simply watching the general pattern of the market; it is about identifying a day when the market is likely to swing significantly. A good summary of a trend day is one which opens at one end of the range, then shortly before the close, the market swings and closes at the extreme opposite end of the day`s trading scale. As a general rule, trend days swing more than three times as much as a regular session, with far less intra-day movement and also show some potential for range expansion.

A trend day does not necessarily have to travel in the same direction as the previous trends seen on daily charts and it is not possible to spot one from merely the opening price. However, the key lies in the increased spread between the opening and closing positions of just one session.

Of course this kind of day offers significant opportunities for gains but it is essential to be able to predict when a trend day will occur, or even identify that you are in the middle of what is likely to become one. Opinion is divided about the best ways to do this but there are some common lines of thought amongst industry experts.

The general consensus is that it is possible to spot a trend day after the market has opened, with a significant overnight gap one indicator worth looking out for. Failure to retrace more than 50% of the gap is another marker for a trend day, in addition to high volumes. Later in the session far greater degrees of volatility will be seen, confirmation that your early suspicion of it being a trend day was correct. Checking the range over the past seven days will also give an idea of whether the market has hit a trend day, as the narrowest price range seen over a seven day period normally precipitates it. A tight contraction of the range on the previous range should also provide a hint that the following session may be a trend day as the markets attempt to reclaim the average movement.

The vast majority of the swing seen on a trend day occurs within the last hour of the session, whilst very little takes place within the opening 60 minutes. Some experts have estimated that less than 10% of the total range of the day is seen within the first hour of trading.

Individuals who are able to predict or spot trend days quickly say that a significant amount of their returns are made on these type of market days, but they also have potential for great losses if they are not identified as a trend day, especially with the surge in volatility later on. http://www.forexlore.com">Forex currency trading is not a simple art but by looking out for some of the key indicators it is possible to go some way towards predicting what the markets are likely to do.

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