7Days-Forex

Successful short term Forex trading is the goal of many new traders who enter the Forex markets. For them the one or five minute chart is the best to check and trade on. It is important to understand that the trend on a small time frame chart may only be a retracement of the primary trend from a higher time frame chart. As a result, understanding the higher time frame trend is an important step in becoming a successful, short term Forex trader.

Certain asset classes tend to be range bound and others tend to move in trends. Two assets that trends well are the spot Forex market and the Commodities. Currencies are based on economies, and it takes a long time for economies to complete the four stage business cycle of expansion, peak, contraction, and trough. While the primary trend marches on for months and years, there can be several intermediate term trends lasting days and weeks. These intermediate term trends offer short term Forex traders many opportunities to trade long and short with the primary trend, or counter to the primary trend. Each type of trading has specific rules. Counter trend traders must exit a position quickly in the event that the primary trend resumes. Currency traders all over the world like to observe the trend from the previous trading session, and pile on in that direction during their session. The previous session can be Asia's session transitioning into the Europe and UK session, followed by the UK session transitioning into the US session. Currency traders will observe the direction from the previous session and attempt to trade with that intraday trend. Most short term movements in the Forex markets are driven by news stories and economic reports which are released at various times of the trading day. Prior to news being released, price consolidates as traders wait to see what the impact of the announcement will be. If the announcement is completely unexpected, a possible reversal of the primary trend may occur. If the news is within the boundaries of what was expected, a period of wild reaction to the announcement will eventually be followed by a resumption of the primary trend.

Price has to move. If no news is scheduled, price will consolidate during quiet trading periods and then breakout either in the direction of the intraday trend, or in the direction of the primary trend. Sometimes price will pull back to a support area before resuming the primary trend which can be an opportunity for a short term trader to enter a longer term swing trade. Being aware of the primary trend is the only way for the short term trader to recognize this opportunity. Other times, price will rally into resistance before the intraday trend resumes.

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