Trend trading is easy to understand and is frequently used in futures trading, option trading , stock trading and currency trading (Forex). Every trader is using a forex chart easily see whether there is a trend, and if so, which way it is heading. Trend trading is the basis of the vast majority of forex strategies, but for successful use of a trend trading strategy much discipline is necessary.
So, what is a trend? In the financial world trend is a clearly identifiable in the pricing of a financial product. This product is a currency pair, but it can be also futures, stocks, options etc. For example, look at the charts below of futures in oil trading and Forex trading that most popular of all currency pairs, the EUR / USD. Every trader need to understand that it is necessary to have the best forex charts provider. For the following images I used charts service from http://www.forexrealm.com/forex-charts/. From this site I also take different technical tools, such as Moving Average, Bollinger, Stochastic, MACD and RSI.
On the chart above you can clearly see the trending of the price on the futures market for oil. After the first price is pushed up to over $ 140 per barrel, in a very clear trend occurs an abrupt trend reversal and the price drops in a sharp decline to below $ 50.
On the above daily candlestick chart of the eur/usd I see how in the period from December 2009 to February 2010 the price is in a downtrend and loses more than 1300 pips clear. There is between or slight flattening, but the trend is never broken, only temporarily interrupted.
In an uptrend the price is still higher highs, in a downtrend ever lower lows. In between is of course talk of retracement, but the overall direction is clear. A well-known trend trader once said that he had a habit of the graph of a price increase to print out and stick on the wall. In his study if he will have no clear trend so the graph could then see from a distance he not stepped into. Rudimentary but effective.
I talk with some traders and technical analysts and they say that prices are about 70 to 80% of the time between a given bandwidth moving. This is also the reason why so many traders use Bollinger Bands in their technical analysis. This is after all an indicator that is ideally suited for predicting patterns where the price remains within a certain range. But there is a lot of other indicators that help to predict price movements. Here is a huge list of technical indicators: Forex | Technical indicators list.
So prices move sideways more often (ranging) than a trend. That makes successful trend trading difficult, but potentially very profitable.