How Do Forex Markets Move?

If you want to successfully trade the various forex currencies, you need to have a basic understanding of how forex markets move because they all follow similar patterns.

The best way of demonstrating this is by looking at long-term charts of various currency pairs. Let's take the GBP/USD as an example.

If you look at the 30 year weekly chart and draw an EMA (100) to show the trend, you will notice that apart from a few periods of sideways movement, the pair is nearly always trending upwards or downwards, and often for long periods of time.

For example, between 1981 and 1985 there was a long sustained downward trend where the price went from about 2.4500 to around 1.0400.

Similarly it then rebounded and trended upwards reaching it's peak in 1992, and if we look closer towards the present time we can see that the GBP/USD has been trending upwards since 2002.

So the point I want to make is that the forex markets generally move in trends (short-term and long-term), so by identifying these trends you know you should only be trading with the trend and not fighting against it. Your decision therefore is when to enter, and not which direction you should be trading.