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Alison Heyerdahl
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Author
Alison Heyerdahl
Edited by
Alison Heyerdahl
Head of Content

Alison Heyerdahl is the Head of Content at FxScouts and a financial writer with extensive experience in Forex trading, broker analysis, and market research. She has reviewed 100+ brokers, publishes weekly YouTube trading videos, and co-hosts the “Let’s Talk Forex” podcast to help traders make informed, safe decisions.

Learn more about Alison Heyerdahl
Author
Author
Chris Cammack
Partner Manager and Financial Writer

Chris Cammack is the Partner Manager and a financial writer at FxScouts. Chris builds and maintains our relationships with our partners to provide our users with the best Forex trading experience.

Learn more about Chris Cammack

How to Establish a Directional Bias

Reading time: 2 min | Intermediate | Trading Strategy

One of the most challenging questions a trader has to answer is: Should I be buying or selling? Traders establish directional bias by studying high-level charts, support and resistance levels, price action and the overall market trajectory. We know from Dow Theory that the market will continue to move in that same direction, until something equal or greater may cause a reversal or a break in the trend.

Directional bias plays a significant role in "counter-trend" versus "trend following" strategy. Ultimately directional bias will help a trader identify the direction of the market trend.

Once a directional bias is established, a trader will have more confidence in executing a trading strategy that is planned and not reactionary or emotionally driven.

Developing a Directional Bias

A thoroughly prepared trade includes establishing directional bias, and this is a two-part process:

  1. Forecasting the direction the price will move in (up or down).
  2. Identify the trigger conditions or the trading rules that will confirm your market bias.

It’s not enough for a trader to only establish a directional bias in the market. A trader will also need to have some trading rules to confirm the market bias otherwise there is no opportunity to establish if the bias was correct.  Confirming directional bias is an excellent habit to have, and it will improve the success rate of trades.

A successful trading strategy is more about the way we think, rather than it is about a trade entry technique or trading plan. At the conclusion of this process, we confirm the directional bias and then open a trade under the right conditions to make a profit.

Directional Bias through Price Action

The easiest way to establish a directional bias is through price action analysis. If prices are moving higher, making higher highs and higher lows, traders should buy. If prices are moving lower, making lower lows and lower highs, traders should sell.

As a check on our assumptions, some trigger conditions need to be set to confirm the perceived directional bias.  These checks can either be a personal strategy or use an existing indicator like Forex Momentum.

Directional bias to sell - USD/JPY Daily Chart
Figure 1: USD/JPY Daily Chart

Establishing Directional Bias through Moving Averages

Directional bias can be concluded through the use of technical indicators such as the Moving Averages. In technical analysis, the 200-day moving average is considered to be one of the most powerful moving averages. If the price is trading above the 200-day moving average, traders should form a directional bias to buy, and if the price is trading below the 200-day moving average, traders should form a directional bias to sell.

Sell below 200 MA - AUD/USD Daily Chart
Figure 2: AUD/USD Daily Chart

Conclusion

The process of developing a directional bias needs to be simple.  If it becomes too complicated, it threatens to add complexity to an existing trading strategy.  Ultimately, having a directional bias will force trading in the direction of the predominant trend.  A trader needs to abstain from opening a trading position where the market has no clear directional bias.

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Meet the Experts Behind Our Unbiased Reviews

Chris Cammack

Partner Manager and Financial Writer

Chris Cammack
Chris Cammack is partner manager and senior financial writer at FxScouts, specialising in broker relations and forex market analysis. As the former Head of Content (2019–2024), he set editorial standards for all content published at FxScouts, including broker reviews, broker comparison pages and education. With over a decade of experience in editorial management and partner relations, Chris builds and maintains our relationships with our partners to provide the best Forex trading experience for our users. He also co-hosts the “Let’s Talk Forex” podcast with Alison Heyerdahl, where he explores trading strategies, industry news, and macroeconomic trends to help traders navigate the markets with confidence.

Alison Heyerdahl

Head of Content

Alison Heyerdahl
Alison Heyerdahl is the Head of Content at FxScouts and an experienced financial writer with extensive hands-on experience in the Forex trading industry. She specialises in Forex trading, broker analysis, and market research, with a focus on helping traders navigate the complex world of online trading safely and confidently. Alison has tested and reviewed more than 100 Forex brokers, assessing everything from regulatory status and trading conditions to platform features and customer support. Her goal is to provide honest, detailed, and practical insights that traders can rely on when choosing a broker. She’s also produced more than 100 educational videos for the FxScouts YouTube channel, where she explains trading concepts in a clear, accessible way. As the co-host of the “Let’s Talk Forex” podcast, Alison shares expert commentary on broker reliability, trading strategies, and market developments—always with a focus on transparency and trader protection.

Ida Hermansen

Financial Writer

Ida Hermansen
Ida is a financial writer with a passion for cryptocurrencies, blockchain networks, and Forex trading. A dedicated crypto trader, she developed a deep interest in Forex technical analysis and price action, continually expanding her expertise in market trends and trading strategies. With a background in digital marketing, SEO, and content strategy, Ida combines her analytical skills with clear, engaging writing to help traders navigate the ever-evolving financial markets. She stays up to date with the latest Forex and crypto developments, researching the best trading environments for new and experienced traders alike.

Stefan de Clerk

Financial Writer

Stefan de Clerk
Stefan is a financial writer and Forex trading enthusiast with over a decade of experience creating in-depth content on finance and technology. His deep interest in geopolitical events, big data, and market sentiment fuels his passion for analyzing how global factors shape financial markets. With a background in marketing and financial research, Stefan believes that Forex trading offers the best insight into the pulse of the world economy. Committed to delivering well-researched, unbiased, and objective information, he helps traders navigate the markets with clarity and confidence.
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