An uptrend is formed by higher tops and higher bottoms and besides the bullish trend, it forms support zones or resistance zones too. Identifying an uptrend on the forex market can help you spot possible reversal or continuation of the trend.
The tops on the bullish trend show the resistance levels and when the prices move down and touch the resistance (top) that’s considered as a pullback. The common quote “the trend if your friend”, suits perfectly the bullish trend.
The uptrend can be suited mostly for swing traders and day traders. A bullish uptrend is formed with higher lows and lower highs.
The tops and the bottoms when you draw a forex trend line can act as key resistance and support zones. As we know, swing trading takes more time to reach your predicted price. The bullish trend can occur on different time frames as an hourly chart, daily chart, weekly chart, etc.
And by trading the bullish trend with a swing trading style, you’re moving with the trending market.
The image example below shows an uptrend in the forex market. In the chart, we have XAA/USD (GOLD) currency pair, on the 4-Hour timeframe.
As you can see, the market has formed an uptrend and then it changed the direction. First, the bullish trend started around the 1670-1675 level price. Then, the price created higher tops, higher bottoms and it reached the 1760 level. With this movement, we can calculate that uptrend has created a bullish market of 900 pips.
How to trade Uptrend
Now, let’s get into the main lesson of this article on how to trade uptrend in forex trading. We explained that the bullish trend started to form around the 1670-1675 level. But trading forex on that level would have been unlikely since we wouldn’t know that market would create a bullish trend.
But we could enter on a buy to trade the uptrend on the 1700 level. The reason why you should enter that price level has to do with the trend line. We draw trend lines as they can help us to find downtrend or uptrend.
And in this situation, the trendline we drew shows a bullish trend. The trendline needs to be connected with the wick of the candlestick patterns at least 2 times to be considered a valid trendline. And on the 1700 level zone, the trendline connects with the wick of the candlesticks for the 3rd time.
This gives an indication that the bullish trend is more powerful and the foreign currency market could continue with the bullish trend.
The example we showed to you, could help you learn to spot and trade the uptrend or the bullish trend. But how can you know if the uptrend will continue still or a reversal trend on the foreign exchange market will happen?
This article will help you learn how to detect a downtrend or the end of an uptrend with price action too.
The examples we give on our blog are based on our technical analysis. But you as a trader should always trade according to your technical analysis.