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What IPEF Could Mean for US Markets

On Monday, May 23rd, US President Joe Biden unveiled a new trade pact with twelve Indo-Pacific countries called the Indo-Pacific Economic Framework (IPEF). The launching of this deal, coupled with Monday’s news that the Biden administration is considering the merits of rolling back tariffs on imports from China, saw the Dow close nearly 500 points higher on Monday while the DXY fell from 103.04 to 102.04. These significant movements have thus far extended through this week into a 1200+ point rally for the Dow and a drop in DXY below 102, fueled by further news such as a seemingly palatable FOMC agenda and optimistic economic growth predictions from the Congressional Budget Office. With this context in mind, let’s consider what IPEF could mean for US markets.  

What We Know

The following countries are the initial partners: Australia, Brunei, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, Vietnam, and the US. Fiji will now be joining as well. The aggregate economic output of these countries is the equivalent of approximately 40% of the world’s GDP.

Significantly, this deal is not an actual free trade agreement, and thus there will be no traditional trade incentives between the US and its partners, as this would require action from Congress. Rather, the pact is ostensibly built on four ‘pillars’, which are, in no particular order: a) improving supply chains, b) encouraging infrastructure and green energy investment, c) promoting trade, and d) reformulating taxation and anticorruption measures.

What We Don’t Know

As many journalists have pointed out, we have few concrete details to work with just yet. While the broad brush strokes of the deal are sweeping, and could feasibly have all sorts of economic and geopolitical implications, negotiations have yet to deliver any concrete particulars, and thus traders and investors are currently in the dark when it comes to the minutiae and fine print.

While it is not fundamentally a free trade agreement or a trade bloc, it is not yet clear to what extent it could end up resembling one, or to what degree it could mirror the eventually ill-fated US involvement in the Trans-Pacific Partnership. It is also unclear how, if at all, the new agreement will compete with the Regional Comprehensive Economic Partnership (RCEP), a set of free trade agreements that have formed the largest trade bloc in the world, which includes most of the countries involved in the IPEF, as well as China and others.

Possible Market Outcomes

While it is too early to know what long-term effects the currently amorphous IPEF will have on US markets, it’s launching appears to have been a bullish fundamental catalyst for the stock market this week, and a bearish catalyst for the DXY. Rather than making any judgments about its consequences in these early stages, the wiser move would be for traders to keep their eye on the pact as it evolves over time, as it may be ripe with future fundamental catalysts.

However, it seems probable that the long-term outcome of IPEF will fall between two general possibilities: either 1) the deal could pan out to be relatively fruitless and toothless, and have little to no real impact on trade, foreign investment, and GDP growth expectations in the US. In that case, there would be little new to report on in terms of fundamentals and corresponding market volatility. Or, 2) the deal could gain traction and yield results somewhat comparable to a free trade agreement. Historically, this can entail increased GDP growth expectations, increased job outsourcing, increased trade deficits, and other conditions in the US that are relatively bullish for the stock market and bearish for the DXY, government bonds, and other safe haven assets. To what extent either of these transpire, we will have to wait and see.

Key Takeaways

Traders see some green today as the S&P climbs a little over 1% today. After several weeks of red, investors may see a minor turnaround for the time being. However, SPX500 bulls should still be wary of a few things that warn of a recession.

Potential Bottoming

There are signs that the index could be bottoming and ready to shift momentum to the upside, however, the past few times have failed to do so. But, with every failed attempt, we have seen a significant bounce that encourages traders to scale back in. The problem is that volatile swings in either direction that ultimately end up in lower lows keeps investors from having enough confidence in the market.

Bond yields have come back up again to around 2.86% which points towards strength in the USD. Treasuries have retained a 2.8% yield for the past month or so. The dollar index has been pulling back regardless, so it could be indicating that either the USD has been priced in or that we are gearing for another long setup on the dollar.

COT suggests that the dollar is still long-heavy while both long and short contracts increase from last Tuesday. At the same time, institutional holdings on the SPX500 have decreased while short contracts saw an increase. The number of long vs short contracts is continuing to even out which is alarming to investors.

SPX500 Setups

spx500

A look on the 4H timeframe helps us see that a bottom could be coming soon based off a few technical indicators. Lower lows have been made but at a decreasing rate. Instead of a stair-like pattern we used to see, the lower lows are forming a kind of slope pattern. This could be indicating that a push higher is likely. The question lies in how much higher will it go before retracing once again.

spx500

The 1D timeframe also provides some potential ideas of where the index could move from here. This current bounce could take the market to that falling trend line which has held up pretty well for three attempts in the past. However, if that gets broken, we could see another test a little higher around the $4060s. So, for this week, I am not expecting a bottom to form here, but I do expect a bounce at least to take price a little higher.

UK100

spx500

UK100 looks somewhat promising on the 1D after price runs up 1.5%. Price was quick to come back up from the bounce off the 200 DMA which suggests that a potential break in this wedge formation could happen. If price does end up breaking and closing above this level, we may see a run higher towards the 7620s.

3 Lies Traders Should Avoid Today

One of the things that makes retail trading unique as a pastime, or even a career, is the degree of honesty and self-reflection it requires. There are many jobs that offer some consistent semblance of leeway when it comes to making mistakes and honing a skill set, but trading is not one of them. No trader can negotiate a raise with the markets or hope for the markets to recognize their hard work; if anyone is not careful with their expectations and risk management, even just one losing trade can be catastrophic. Hence, why truthfulness matters in the world of retail trading: it often spells the difference between passive income and financial ruin. With that in mind, let’s explore 3 lies traders should avoid today.

“My strategy doesn’t need stop losses”

Regardless of a trader’s win rate, every trustworthy strategy incorporates stop losses to some meaningful degree. This is because it is as near certain as statistically possible that unmitigated risk in trading will eventually have terrible consequences. Even if a strategy somehow achieved a win rate over 95% with consistent incremental gains, unchecked risk would still be present in every trade, resulting in a handful of losses that could easily erase all prior profits in a fraction of the time (I know this from personal experience). Stop losses, especially trailing ones, are thus an indispensable tool for traders when it comes to safeguarding against inevitable losses and making their wins count in the long run.

“I will compound my account so fast”

Building a large trading account is a long, gradual process that requires plenty of discipline and patience. Because of this, if a retail trader approaches entering and exiting positions through the lens of a get-rich-quick scheme, they are bound to become disappointed and discouraged, and likely lose money along the way due to over-leveraging and impulsive trading. Thus, it is important for traders to generate realistic expectations for themselves, and not take success for granted. Some ways to practice this include a) thoroughly backtesting any strategies of choice, b) avoiding trading out of financial desperation, and c) recognizing that your value as a person has nothing to do with your account’s performance.

“Fundamentals don’t really matter”

Technical analysis is a wonderful tool for every trader to have equipped, and there are myriad technical indicators worth exploring and adding to any strategy. Likewise, sentiment analysis is valuable as well, since anticipating buying and selling pressure is at the heart of trading as a discipline. However, even with these two crucial forms of analysis at our disposal, it must never be taken for granted that traders are buying and selling real securities.

In a new age of gamification and excessive speculation fueling price action volatility in the markets, it can become easy to believe, even subconsciously, that trading is reducible to a worldwide chart-reading game. Therefore, it’s possible for many traders to miss out on significant fundamental catalysts and opportune points of entry and exit, because it is easy to forget that we are trading in real markets that are shaped by concrete circumstances and events in our world. Thus, whether a trader is buying or selling stocks, currency pairs, or bonds, it is always wise to conduct fundamental analysis, whether that be monitoring macroeconomic data, business fundamentals, or other variables.

Key Takeaways

The topic of interest rates has been heavy on the mind of world-renowned investors such as Warren Buffett, as well as the world’s consumers, in the recent past. Interest rates can have a huge impact on the cost of a wide array of necessary goods and services, including grocery items, home heating, gasoline, and even housing costs. 

Interest rates have been at historically low levels for years, which was due in part to low inflation, but also as a stimulative measure to produce economic growth. However, it appears that is unwinding, and in this article, we’ll take a look at whether interest rate increases may occur, and if so, in what magnitude.

future interest rate

Why Interest Rates Matter

Interest rates are critical for economic growth, as well as controlling inflation. The reason is that lower interest rates encourage consumers and businesses to borrow money in order to invest it in something. That could be a new factory, a new small business, a house, or anything else that requires capital investment. The idea is that if it is relatively cheap to borrow money, businesses and consumers are more likely to do so, as the hurdle in terms of achieving economic profit over and above the interest rate paid is lower.

That works in the opposite direction as well, so raising interest rates is a way for policy makers to curtail what could be perceived as excessive borrowing, which could then result in overinvestment. If overinvestment occurs, it could result in very hot economic growth, which generally results in inflation.

In other words, interest rates can be used as one tool to either encourage economic investment, or curtail it, depending upon prevailing conditions with growth and inflation.

Factors That Determine Interest Rate Levels

Now, let’s take a look at the factors that help determine interest rates, which will provide some clues as to whether rate increases are appropriate in 2022, and if so, by what magnitude.

One factor, as mentioned, is the rate of economic growth. There are many ways to measure growth but the most cited one is gross domestic product, or GDP. That is simply a measure of economic activity of a country on the whole, aiming to capture everything that takes place in a country’s economy, and placing a dollar value on it. In this way, observers can determine how quickly or slowly a country’s economy is growing, and if a recession is on the way, or even already underway.

GDP in the US has risen extremely quickly since the worst of the pandemic in 2020, and in fact, since the bottom in early-2020, GDP is up about 24% on an absolute basis. The US economy continues to hit new records in terms of economic output, and crested $24 trillion on an annualized basis early this year.

future interest rate

The fact that the economy is making records isn’t cause for concern for interest rates, necessarily, but the rate of growth is what could cause some angst among policy makers. The reason is because if an economy grows very quickly, it generally results in rapid price increases for goods and services, which is inflation. Thus, it follows that the GDP discussion should also include inflation numbers as they are correlated.

Inflation can also be measured in a variety of ways, but the most common one is the Consumer Price Index, or CPI. This is a collection of goods and services that are priced at regular intervals, and the combined pricing is then put into an index to measure overall inflation. The CPI has risen quite sharply since the pandemic began, as not only has the economy grown rapidly from the bottom, but various supply chain issues have created shortages in certain sectors of the economy. That has combined to generate high levels of inflation, and the CPI is up more than 6% in the past year as a result. The US has spent the past decade at less than 2%, so current levels of inflation are extremely high.

What Does This Mean For Rates?

With GDP and inflation running hot, the natural response is to raise interest rates, as that is a primary tool to fight an overheated economy that has inflation. Whether the economy is overheated now is up for debate, but virtually everyone agrees the US has an inflation problem at the moment.

The last time rates were raised meaningfully was a gradual increase that took place from 2016 to 2019, when the benchmark Fed Funds rate rose from less than 0.5% to 2.5% over a period of almost three years. At the time, GDP was rising quickly – at 4% to 5% annually – but inflation hadn’t taken hold in a meaningful way. Given this, the increase in rates during that period would have been aimed at preventing an overheating economy, rather than fighting inflation.

If we contrast that with today, we have GDP rising at 3% to 4%, but inflation is spiking much higher than normal. That implies that rising rates today would be aimed not at preventing an overheating economy, but rather to fight inflation that is already very high. All else equal, that would argue for potentially quicker and larger rate increases as the situation is quite different this time around.

The ultimate magnitude of rate increases will depend upon several factors, but if we take GDP and inflation as a guide in comparison to prior hiking cycles, it is clear investors should expect a Fed Funds rate of at least 2.5% in the relatively near future. That would be another ~200 basis points higher than today, or equivalent to eight quarter-point rate hikes. That aligns with guidance from policymakers, and would put this hiking cycle in line with the prior cycle in terms of magnitude. The difference this time around is that it is likely to take much less time to get those eight hikes than it did in prior cycles, given where inflation is today.

Final Thoughts

While no rate hike cycle is exactly comparable to prior ones, investors can take clues from prior cycles to gain insight into how the current cycle may play out. Prior rate cycles were slow and gradual to combat a hot economy. Today, the issue is not an overheating economy, but rather, overheating inflation. That argues for a swifter and potentially more meaningful response from policymakers on rates, so we see the current cycle as producing a quick road to at least eight rate hikes in the relatively near term.

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In trading, money is the only tool that we use to make money. If prices go high after buying one, we become really happy. But the scenario gets completely opposite when we lose 5 in a row. We develop the fear that the trading account will be blown up soon. 

Trading is a very practical thing yet it brings tremendous excitement and joy for us. But it should not capture one’s emotion and logical mindset. Emotions should not make you trade. You should do it with logic and expertise. Still, there is always the fear of missing out. It’s high time to get ways for ‘how to overcome your trading fear’.  

This fear for a longer span of time not only leaves a negative effect on your trading decisions but also affects your overall mental health. There are some ways that expert traders follow to overcome fear and emotion. Professionals who can control their fear and emotion are prone to succeed most times. How have they achieved this mental robustness? Let’s explore-   

Trading Fear
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How to overcome your trading fear easily?- A step-by-step approach

1. Craft a Positive & Winning Performance

You must agree that successful trading is all about 90% mindset and 10% skills. After placing an order, if you find that you are breathing quickly or feeling negative, it’s sure that you are expecting something negative. When your mind is having a negative expectation, it can block your logical thinking ability. Anxiousness can let you make many common mistakes. 

Does negative thinking really matter? After researching well and taking suggestions from others yet you are anxious, there is a high possibility that you will get a negative outcome. In order to win, at the first move, you have to eliminate this negative attitude and turn that into a winning expectation. You should have the trust that you can trade successfully. 

Having negative outcomes in a row often breaks the confidence level of traders. In such a situation, keeping the mind cool is the first virtue that you have to achieve. You should remember your success and its way. You will get a way to win along with getting some vigor and confidence back. 

2. Try to learn something new in trading

Suppose, the situation is not going well for you. What’s you do in such an anxious situation? In such a situation, making perfect trading decisions is hard as you cannot logically analyze everything. This time can be spent on learning new things about trading. A new strategy of trading is always fun and can make you profitable in the future. 

There is no fixed time to learn new things in trading. Whenever you get time or make time, you can learn interesting trading things such as Iron condors, Credit Spreads operate, RSI, MACD indicators, and so on. 

There are various online forex day trading courses that you can join to master the genre. You will be more confident when you will gain new skills and know more about the ups and downs of trading. 

3. Conduct in-depth market research 

It’s important to research the market very well in order to understand the patterns of trades. If you don’t know what to do next, it can emotionally burden you. Even if you have placed an order yet you have some doubts. Take a step back and research the topics you want to know. Regular practice and study are important when it comes to mastering the art and science of trading. If you cannot manage the best guide for yourself, join a leading online trading academy to get expert help and training facilities. 

You can prepare a list of things that you find hard to understand and heard the first time. After that, you need to pick topics that you need to learn first based on your trading requirements. The trading list should be updated rather than increased on a regular basis and in a systematic way. Trading is a vast field and mastering that within a year is not possible. You have to go slow and steady for long or for your entire trading career. Learning has really no end in the trading field. 

4. Enable paper trade until you master

While learning new topics on a regular basis, you will get new strategies on your own. You will want to apply your newly developed strategies. But there will be some doubts for sure. These doubts can lead you towards trading fears and you can get controlled by your emotions. 

So, whenever you craft a new strategy and want to deploy that or wish to use a new indicator, you can enable paper trade before deploying it in real. Yes, paper trading is not perfect by many means but here you will definitely get a controlled environment. The controlled environment will help you in learning how to enable comfortable envelope-pushing with trades without risking your capital. 

5. Analyze 5 completely new charts

When it comes to how to overcome your trading fear after losing in a row, experts suggest analyzing new charts to get insights. It’s common for many traders to get emotionally attached to the stock, ETF, or any product they trade on. They spend many hours nurturing them and keeping hope in them. Keeping hope in everything can result in something counterproductive. So, it’s always better to search 5 new charts of companies where you do not that that much attachment. 

After finalizing the list of charts, you should analyze each one deeply and prepare reasons to buy or sell them. In this way, you will be able to develop a neutral mindset. Such a practice will help you evaluate a position without having any emotional attachment. When there is a less emotional attachment, there is less trade fear and you can think more clearly. 

These are 5 steps that successful traders always follow to overcome trading fear. So, if you too are concerned about how to overcome your trading fear easily, following these steps will be a great help for you. 

Concluding to how to overcome your trading fear


Following these steps is easy and does not require any additional effort. These 5 steps are actually a system process that not only trains your mind but also helps you in having new skills. Gaining new skills is challenging yet you have to do it as the trading market is really complex. Effective and consistent effort on a regular basis can turn you into a successful trader. These steps are there to make you consistent and wise. 

 

Several days ago, global markets fell into frenzy on the Russia-Ukraine conflict going on. The Russian military sent troops the the border between the two countries, although recent reports claim that some of the troops have been sent back to base. There are still no clear signs that de-escalation has occurred on the borders, but diplomatic engagement still seems on the table for Russia although it is hard to tell. The outcome of this occurrence is completely uncertain, and the relation between Russia and forex is causing some wild behavior.

USD Pairs

If one thing is for certain, the growing tensions cause the USD to fly higher on the risk-off sentiment from investors. At the same time, when we heard report of calling troops back, the dollar fell while currencies like GBP, EUR, CAD, AUD and CHF began to rise over the USD. Sadly, escalating conflict leads to a higher dollar and gold price, so if we disregard trading for a minute, we should just hope that the tensions ease even at the cost of a falling USD.

russia and forex
Forex heatmap at 9:02 a.m.

USOil

Oil prices rose to the highest level in 8 years to the high $95s yesterday on escalating conflict. Investors fear that if this incident gets worse, oil drilling will cease. This caused a surge in oil price on the anticipation of lower production. USOil dropped 2.89% at the time of writing this after news of some troops returning home.

russia and forex

Indices

American, German and British indices rose this morning on the recent news. However, if tensions were to get worse, we could probably see another decline on all sides. Indices are probably not the best thing to trade during this time due to the higher volatility that can come into play in the global equities markets. This is true especially during attempts at negotiations ahead because we can't say who will agree to what and if Russia will accept control over a small part of Ukraine or if there will be a military pullback.

DAX
UK100
SPX500

We are still waiting for updates and will be keeping up with further news.

There are plenty of things to consider when your looking to choose a forex broker and thousands of options for you to choose from. How do you know which broker is the best fit for you? How can you be sure your broker is legitimate? Here are a list of the top 5 most important things to look for in a broker!

1. Choose a broker that is regulated + secured

A regulated broker is a broker which is federally monitored and is continually being watched by local governments. Regulation ensures that what you are going to be doing with your money is relatively secure. Without regulation, a broker has free range on how they choose to handle your money. Because of this, you could face more issues trying to deposit or withdrawal money.

Choose a forex broker

2. Choose a forex broker with good transaction costs

Forex brokers make their money through through fixed rate commissions, and/or taking a small bid/ask spread on your trade. Spreads and commissions are similar but spreads can be a bit more dynamic and get wider or smaller based on the markets liquidity. During an off hour, spreads get bigger, during a busy trading hour, they tighten.

When you are checking out a broker be sure to look at the reviews online as well as go through their website. Look for any information about what the broker says about their own spreads and their own commissions. Be competitive here and aim to find good spreads and commissions offered by different brokers.

3. Choose a broker that offers easy deposits + withdrawals

At the end of the day, it doesn't matter how well you do with your trading account if you can't withdrawal your money. When looking for a broker, you want to have easy access to deposit and withdrawal from your account. Usually, a well regulated broker will have a very smooth process with this as opposed to unregulated brokers.

4. Choose a broker with competitive trading platforms + tools

Another aspect to take into account when choosing a forex broker is what trading platforms and tools they provide. You want to make sure that the platforms that your broker is offering are competitive and align with your preferences. Further, checkout the tools that they offer traders on their website.

5. Choose a forex broker with helpful customer support

Lastly, and perhaps most important, you want to make sure your broker has exceptional customer support. When facing issues regarding your money, you want to feel confident that your broker will provide you will easy access to support. Read reviews and reach out to the customer support of different brokers so you can get a feel for how reliable their customer support is.

Hopefully, reading this article provided you with insight on how to choose a great broker. Checkout a list of our favorite brokers here. Or take our broker quiz here to find the best broker for your needs!

Choose a Forex Broker

As a beginner trader it can be difficult to know which are the best currency pairs to trade. To help identify the best currency pairs to trade you need to understand that different markets have different behaviors. Some currency pairs tend to be highly volatile while others have low volatility. The volatility of the currency pair is important because it indicates the risk associate with that pair. Pairs with higher volatility are associated with high risk while pairs with low volatility are typically less risky.

High Volatility Currency Pairs

Often times, new traders gravitate to high volatility markets like gold because they seem more exciting. However, these are not the best currency pairs to trade and can be very dangerous for new traders. Traders who trade with high volatility can make a lot of money in a short period of time. But, just as you can make a lot of money trading with these currency pairs, you can also lose money just as fast (or even faster). Because of this, many new traders who attempt to trade with these currency pairs quickly drain their account.

Currency pairs to trade

As a new trader, we suggest avoiding these pairs altogether until you are confident in your strategy. There are a lot of things that could go wrong when you're learning how to trade and you want to avoid making mistakes on highly volatile currency pairs. Remember, our first goal as a trader is to protect our capital, don't risk draining your account trying to make money fast.

Popular High Volatility Pairs:

Low Volatility Currency Pairs

Currency pairs with low volatility are pairs that move less aggressively and are more forgiving. These types of currency pairs are much more suitable for newer traders. This is because when a new trader makes a mistake, which will inevitably happen throughout the learning process, it will not drain their account. For example, a trade on a currency pair like EURUSD which goes against you may put you down 30 pips in a span of 5 hours. While in that same time frame, a GBPJPY trade that goes against you may put you down 120 pips.

Currency pairs to trade
USDCHF is a low volatility currency pair which makes it a great pair for new traders to trade.

Popular Low Volatility Pairs:

We recommend that newer traders should stick with low volatility pairs like EURUSD, USDCHF, AUDUSD, and AUDCHF. Use these pairs to help get your feet wet and test your strategy before jumping into higher volatile markets. To be even more cautious, we recommend starting on a demo account and not to put your hard earned money on the line until you have a strategy behind what you are doing.

Forex Trading Basics: What are the Best Currency Pairs to Trade?

One of the most common questions we hear from beginner traders is "How Much Money Do You Need to Trade Forex?" and our answer is: well, it depends. The amount of money you need depends on your goals as a trader. Is your goal to make a lot of money or are you going to try to learn first before you deposit more money? Hint: we recommend the second option, Here's why:

How Much Money Do You Need to Trade Forex?

The Reality vs. Social Media: Getting in the right mindset as a beginner forex trader

It is likely you were introduced to forex though a social media guru who is trying to sell you on this get rich quick idea of trading. Believe us when we say we've been there (Watch our video here). However, this mentality is a dangerous mentality for new traders. New traders who believe that making money in the foreign exchange market is easy will often over leverage and blow their accounts very quickly.

The reality is that trading forex is one of the most competitive ways to try to make money. Statistically speaking, the majority of new forex traders lose money in their first year and most new traders give up within their first 90 days. So, if you want to get into forex trading to quickly make a lot of money, you're probably better off somewhere else.

It is possible to make money trading forex, but it's not easy and it takes time. To get to the point in your trading career where you're making money you must be motivated by something other than money, because it won't always be there. Is trading something you are passionate about? Or are you just trying to find a way to make money? Trading will get tough, what is going to help you push through the tough times?

How Much Money Do You Need to Trade Forex?

As a beginner forex trader, we recommend starting with at least $500 on a .01 lot size. With this account size and recommended lot size you aren't going to be making huge returns. However, we would rather you get comfortable making a slow amount of money overtime consistently then taking your $500 and losing it all very quickly because you want to use big positions. If you attempt to trade with a larger lot size you could risk blowing you account very quickly. Remember, it is much easier to lose money in forex than it is to make money.

Although you will not be making huge returns with this account and lot size, you are going to learn a lot and avoid losing your capital. As your account size grows your overall gains will also grow.

What You Need to Consider Before Trading Forex

How Much Money Do You Need to Trade Forex?

Before putting real money into forex trading you have to understand the risks. Knowing that statistically most new traders lose money, it is likely that you will also lose money at the beginning. We do not recommend putting money into forex that you cannot afford to lose. If you do not have money to put into forex that you are comfortable with losing, we recommend trading demo. Trade on a demo account until you are able to put aside this money and feel confident in your strategy.

Additional Resources: How Much Money Do You Need to Trade Forex?

Trend trading is perhaps one of the most commonly used strategies in the forex world. In this article we will be sharing tips on how to determine the end of one forex trend and the potential start of a new one. We will share 3 specific clues that you should be looking for when trend trading that will help improve your entries and exits.

Clue 1: Trend Line Break

One of the first indicators that a forex trend is ending is a trend line break. Taking a look at the chart below, you can see that there are multiple points throughout this bullish trend where price was supported by the bulls. Throughout this trend, the pair continued to form higher highs and higher lows which proves price to be strong. However, at some point this forex market was ready to start heading south. At this point, circled in the image below, buyers were no longer able to buy this market higher. This was the first time throughout this trend we see a pullback which is not supported by the bulls, showing that the market is likely ready to reverse.

How to Tell When a Forex Trend is Ending!
The first clue that a forex trend is ending is a trend line break.

Clue 2: Failure to Create a Higher High

After a trend line break, the first sign that a forex trend is ending, we see a bullish push back that fails to meet higher highs. Throughout the bullish trend price continued to reach higher highs. However, after the initial trend line break we see lower highs beginning to form. Thus, indicating that bears are pushing the market back down.

How to Tell When a Forex Trend is Ending!
The second clue that a forex trend is ending is a failure to meet higher highs.

Clue 3: Broken Support Levels

Finally, we see this level of support, which has held for many weeks get violated and broken beneath. Price eventually dropped below a significant level of support showing that sellers have control of this market.

How to Tell When a Forex Trend is Ending!
The final clue that a forex trend is ending is broken support levels.

How to Use A Forex Trend To Your Advantage

Looking back, we had 3 major clues that this trend may be headed to the downside. these clues are possible things you can look for to potentially find the start of new trends or the end of a trend. We had a bullish structure and when we saw this structure break it gave us a clear indication that sellers may have some room to run. Our second indication was the forming of a lower high. Finally, there was a break of structural support. With this information about trend trading, we could have identified the series of lower highs and potentially taken a short position.

Watch The Video: How to Tell When a Forex Trend is Ending!

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