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In the Forex training video above you will see two trading charts. The chart on the left shows an uptrend and the chart on the right shows a downtrend.
When we see the market trending in the upwards direction, we call this a BULLISH market. The reason why is because traders who buy or ‘go long’ are called BULLS. So, when we see an uptrend we know that the bulls are in control. Once we join the highs of the previous trend with a line, you will see that the new uptrend gained momentum at the point at which this previous line was broken. This is when the downward movement completely ran out of steam and the market changed direction.
When we see the market moving downwards, we call this a BEARISH market. The reason why is because traders who sell or ‘go short’ are called BEARS. It is at this stage that the bears have seized control. If we join the lows of the previous trend with a line, you will see that the new downtrend started to gain momentum at the point at which this line was broken. The bulls have totally lost control at this stage and the market had no choice except to fall further.
When the Forex market has no sense of direction it tends to consolidate. It is at this point that bulls or bears have no real power so trading can be minimal. There are Forex trading strategies that can take advantages of this but the majority of traders stay away until a new trend is born.