Forex experts claim that the currency market can be in one of two positions – either as a trend or as flet.
Trending market is characterizes by the presence of a pronounced exchange rate dynamics vector, that means, this is market condition when it becomes possible to identify some trends in the fluctuations of currency prices.
Market price trend reflects a priority way in the exchange rate dynamic, despite the fact that the rate naturally varies all the time – either rising or falling. It is believed that Forex trading in a situation of trend is the most favorable option of doing the really profitable speculative deals. From the point of technical approach view to the analysis, the presence of the Forex trend in the market should be supported by appropriate signals so-called trend indicators. Ideally, such indicators should clearly indicate the priority traffic rate in a specific vector – up or down.
Needless to say, the trend presence or absence in the foreign exchange market – is a relative term. It all depends on what time horizons (periods) predict the trader when conductive market analysis for the detection of a possible trend. It turns out that, for example, in a relatively long period it can be identified a kind of trend in the market, but in the short term, for example, the detection of any specific trends can be under a big question. Or vice versa.
The lack of trend in the Forex market. The “lateral” trend
The situation of the lack on the market of any trends, i.e. the lack of the pronounced currency rate movement in a defined direction, called by traders and analysts of Forex as flat. Often, such market condition is called differently – lateral trend. It is obvious that the flat is characterized by the market fluctuations in a narrow diapason – so narrow that is almost impossible to detect any tendency for such a market. The mentioned trend indicators in a situation of the lateral trend, usually served false signals, which, incidentally, also confirmed the trend absence.
When the market is in a typical flat condition, the most reliable signals from the point of analysis view are so-called antitrend indicators, which otherwise are called oscillators.
Typically, the oscillators used to produce (generate) signals the following basic types, that represent the greatest value:
- identifying of the overbought or oversold situation in the market;
- identify of the graphical differences situations between the rate and the oscillator.