The ability to recognize a trend is one of the most important skills any trader can harness. The FX market, like other financial markets, will trend upwards, downwards, or sideways over varied timeframes. If a trader can learn to discern which direction the market is trending, they position themselves to succeed greatly. Today, as a result of increasingly sophisticated charting packages and trading platforms, even novice traders are easily able to utilize sophisticated indicators to help recognize trends.

A trend is simply the overall direction of the market. At some points, trends may be easily recognizable. At other times, trends may be overshadowed by wild market fluctuations or hidden within a ranging currency pair. Failing to recognize a trending market can mean death to even the most skillful trader. For example, if a trader shorts a currency pair at what they perceive to be a strong resistance point, but fails to recognize the markets overall upward trend, they may be on the wrong side of the position. Although the resistance seemed strong in this case, the upward trend is often more powerful and more likely to lead the markets movement.

As trading platforms become more sophisticated, the average trader is able to harness increasingly complicated indicators to recognize trends. Tools that were once reserved for only the most sophisticated traders are now available to anyone with a basic charting package and an internet connection.

ADX
An ADX line illustrates the directional change and/or movement on a scale of 0-100. When the ADX value is rising, the market is trending. When the ADX line falls, a trend is not presently occurring. Analyzing the ADX is only the first step; it does not tell you what direction the market is trending.