What is a trending market?
A trending market is one in which price is moving in one direction.
Sure, the price may go against the trend now and then, but looking at the longer time frames would show that those were just retracements.
“higher highs” and “higher lows” usually note trends in an uptrend and “lower highs” and “lower lows” in a downtrend.
When trading a trend-based strategy, traders usually pick the major currencies and any other currency utilizing the dollar.
They do this because these pairs tend to trend and be more liquid than other pairs.
Liquidity is important in trend-based strategies.
The more liquid a currency pair, the more movement (a.k.a. volatility) we can expect.
The more movement a currency exhibits, the more opportunities there are for price to move strongly in one direction.
This is as opposed to bouncing around within small ranges.
Other than eyeballing price action, you can also make use of the technical tools you have learned in previous sections to determine whether a currency pair is trending or not.
