In this article, I will introduce every single thing about the uptrend in Forex, including 2 main parts.
(1) What is an uptrend? How to define an uptrend and some classic examples.
(2) Introduce 2 signals and 3 safe trading strategies with the highest accuracy in an uptrend.
“80% of the time, the market goes sideways. And all professional traders focus on the remaining 20% when the market enters a trend. It is simply because there is a trend, there is money.“
To make things easier to understand, all you need to do is to wait for the market to confirm the trend. Then, focus on finding safe entry points.
This may be the article to help you make a lot of profits in trading. So, I hope you read it carefully and remember it. I will try to use the simplest words to convey to you.
What is an uptrend in Forex?
An uptrend is a bullish trend in the market. Prices will continuously increase over a certain period of time. They create higher peaks after peaks and higher troughs after troughs.
– Basic features of an uptrend in Forex:
The following peak is higher than the previous one. Peak (2) is higher than peak (1). Peak (3) is higher than peak (2), and so on.
The following trough is higher than the previous one. Trough (B) is higher than trough (A). Just like that, the price will increase as the troughs get higher gradually.
These are the two most basic signs for you to identify a market’s uptrend. When the price exceeds a peak, it will inevitably create a new higher one. Your job is to wait for the market to confirm a new trough that is higher than the old one. If this happens, you can claim that an uptrend has been created.
Some popular uptrend patterns
Pattern 1: The most perfect uptrend
An uptrend is considered perfect when it draws a trendline.
What is a trendline? In an uptrend, the trendline is a straight line connecting troughs. It acts as a support line for the market. And when the price touches the trendline, it will bounce back.
In an uptrend, you just need to draw a straight line connecting the 3 troughs together. So, we have a bullish trendline. This is considered the most perfect case of an uptrend.
Pattern 2: The price breaks out of the resistance and enters an uptrend
Signal 1: The price is moving sideways, then it breaks out of the resistance and rises => Peak (2) in the future will definitely be higher than peak (1).
Signal 2: The price retests the recently passed resistance and then rebounds => It creates trough (B) higher than trough (A).
=> The market goes sideways in a certain period of time. It then breaks out of the resistance and rises sharply, creating an uptrend.
Pattern 3: The uptrend creates (support/resistance) levels
This is one of the 3 classic uptrend patterns that you need to keep in mind.
As prices rise and form a new peak, this peak will become a resistance zone. If the price exceeds a peak (breaks out of the resistance) and rises, that resistance will always become a support zone. And I will collectively call them levels. The price falls back, touches this level, and continues to rebound. This process goes on and on and on and forms an Uptrend.
Pattern 4: Other uptrend patterns
Uptrends are not always the same. Sometimes, it simply creates higher peaks after peaks and higher troughs after troughs. But it does not follow any rules at all.
(1) The price enters an uptrend. The following peak is higher than the previous peak. But the following trough is equal to the previous trough.
(2) The ladder uptrend pattern: The price exceeds peak (1) and creates peak (2) which is higher. It then goes sideways, creating trough (B) higher than trough (A). The price continues to rise, creating peak (3) higher than peak (2). And then it goes sideways…. Just like that, the market creates an uptrend within a ladder pattern.
(3) The uptrend pattern with strong price fluctuations. These are uptrend patterns that still meet the following conditions: The previous peak and trough are higher than the previous ones. But compared to other uptrend patterns, it is not good-looking.
When is an uptrend over?
The answer is simple. It is when uptrend conditions are broken. The previous peak and trough are no longer higher than the previous ones => The uptrend has ended.
When an uptrend ends, the market will likely fall into sideways to accumulate bullish momentum. Or it will get into a downtrend.
Detailed examples of uptrend patterns in Forex
I have introduced you to all the theories you need to understand when the market is in an uptrend. And now, before going to principles and how to trade in an uptrend, I will illustrate some popular uptrend patterns that you may come across.
– The perfect uptrend pattern, in which we can draw a trendline.
– The uptrend creates (support/resistance) levels.
– The ladder uptrend pattern, in which the price increases to create peaks and then goes sideways.
Principles for opening Forex orders in an uptrend
There are certain principles that you must keep in mind.
– If you try to fight a running train, it will crush you into pieces. The same goes for an uptrend, aka a bullish trend. If you try to fight against it with SELL orders, then the probability of losing money is high. Therefore, in an uptrend, you should only open BUY orders.
– 80% of the time, the market goes sideways. And in the remaining 20%, the market will show a clear trend. So all you need to do is wait, patiently wait. We only trade when the probability of winning reaches the highest. And price trends are the key to opening successful orders.
– Price will only increase continuously in a period of time. Therefore, the higher the price becomes, the higher the probability of ending an uptrend is. For some professional traders, the higher the price is, the lower the amount of money they trade.
Forex signals in an uptrend
The mantra: In an uptrend, you can only open BUY orders. Please keep this in mind.
There are 2 extremely important signals in an uptrend that you should know. They are (i) Bullish reversal candlestick patterns with high accuracy and (ii) Levels (Support/Resistance) formed in an uptrend.
The most reliable bullish reversal candlestick patterns
There are only 3 candlestick patterns with high accuracy in an uptrend. They are Bullish Pin Bar (Hammer candlesticks), Bullish Engulfing, Morning Star candlestick patterns. These are 3 types of bullish reversal candlestick patterns that have high accuracy (about 80%) in the market. And I will show you how to use these 3 candlestick patterns in the uptrend below.
Levels (Support/Resistance)
The bullish market creates following peaks higher than previous ones. These peaks become a resistance zone in the uptrend. When the price crosses a peak (breaks out of the resistance) and rises, it tends to retest these levels.
How to trade Forex most effectively with an uptrend
So we have 2 signals in an uptrend for you to make trading decisions. And now, I will combine them together and offer the 3 following effective Forex trading strategies.
Strategy 1: Trendline combined with Doji or Bullish Pin Bar candlestick
This is a trading strategy using the trendline. At this time, the trendline acts as a support line. When prices create balanced candlestick patterns such as Doji or bullish reversal candlesticks such as Bullish Pin Bar, this is a reliable signal for the market to rebound.
Place a BUY order with the Trendline in an uptrend as follows:
+ Entry Point: As soon as the price completes creating a Bullish Pin Bar candlestick or a Doji candlestick above the Trendline.
+ Stop-Loss: At the nearest support level before the price touches the Trendline.
+ Take-Profit: You should take profits when the price touches resistance levels that have been formed in the past.
Strategy 2: A reversal candlestick pattern appears at levels in an uptrend
This is the super classic T.L.S strategy (Trend, Level, Signal). It is a combination of trends, levels, and candlestick patterns. And it is one of the money-making formulae of so many successful traders around the world.
The price in an uptrend usually tends to retest the levels just passed with bullish reversal candlestick patterns. This is a condition for you to open a BUY order
Place a BUY order as follows:
+ Entry Point: As soon as the price finishes creating a signal candlestick pattern like Morning Star (or Bullish Engulfing, Bullish Pin Bar) at the Resistance retest point (which is a new Support after the breakout).
+ Stop-Loss: At the nearest trough before the price retests
+ Take-Profit: You should take profits when the price touches resistance levels that have been formed in the past.
Strategy 3: Reversal candlestick patterns in an uptrend
It is not always in an uptrend that you can draw a trendline. And in an uptrend, the price does not always retest the old level to create a candlestick pattern. Therefore, in many cases, the signal alone is enough for the uptrend to carry on.
You can understand it simply as follows: The price in an uptrend will create trading signals which are reliable bullish reversal candlestick patterns. This is the time when you can place BUY orders and live off the strong uptrend waves.
Place a BUY order as follows:
+ Entry Point: As soon as the price completes a bullish reversal candlestick pattern like Morning Star (or Bullish Engulfing, Bullish Pin Bar).
+ Stop-Loss: At the nearest trough before the price creates a bullish reversal candlestick pattern.
+ Take-Profit: You should take profits when the price touches resistance levels that have been formed in the past.
Summary
+ The trend is our friend. Invariably, the trend is the best friend of traders. And the principle is: There are trends, there are transactions. No trend means doing nothing.
+ In an uptrend, all you need to do is: wait for the signal and open BUY orders. It is not difficult for you to recognize that the market has been on an uptrend. However, waiting patiently for high-precision entry points is extremely difficult.
+ Bullish Pin Bar, Bullish Engulfing, and Morning Star are the 3 most accurate candlestick patterns used as entry signals in an uptrend.
Open the Japanese candlestick chart and review the price history. Verify if the knowledge you have read today on How To Trade Blog is correct or not. We will have articles detailing trading strategies applying trends and candlestick patterns. Please look forward to it.
Please read this article in detail again. Because most likely, your money is made from the knowledge in this article. Finally, goodbye and see you again in the next article about the downtrend.
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