Here’s how…but first some basic lessons first:
1. when a
market is trending nicely, you will notice price makes peaks and valleys like
the chart shown below.
2. these
peaks and valleys are called price swings.
3. if a
market is trendine up, what you will have is a pattern in increasing peaks and
increasing valleys (in layman’s terms)
4. if
a market is trending down, what you will have is a pattern of decreasing
peaks and decreasing valleys.
5. at any
time, this pattern is broken, there is possibility that the trend may be
changing. Notice that I used the word “possibility” here.
WHAT IS A TREND?
The definition of a trend: The movement of price over time
whether up, down, or sideways is called a trend. Which means there are three
types of trends:
·
up trend
·
down trend
·
sideways trend
The chart below shows a trending market.
First is a downtrend then an uptrend.
WHERE IS THE CLUE TO INDICATE THAT THE MARKET CHANGED FROM
DOWNTREND TO AN UPTREND?
Its pretty simple really:
1. Notice
that, as the price was in a downtrend, a Swing High (SH) was formed which was
higher than the previous SH. But this alone is not a valid indication of trend
change to upward trend yet…
2. The
next thing to wait and see if a Swing High (SH) would be formed which would be
higher than the previous swing high.
Once these two clues are fulfilled there is great possibility
that the trend has change to an upward trend.
HONESTLY, THE FOREX MARKET IS NOT A PERFECT WORLD…SO WHAT DOES
THAT MEAN?
It means that the chart above is the most ideal, “perfect
word” situation where everything just follows that pattern.
But you and I know that this is not going to happen all the
time.
Sometimes you get knocked around trying to guess if a new market
trend has started because the conditions are fulfilled for trend change
but only to find out some time later that the market moves again in
its original trend.
Such is the nature of the market, you will learn as trade
it and though technical analysis is not a perfect science, it is more of an art
to be quite honest.
How you may wonder…?
The answer is simple really: if it was a perfect science with
its fixed laws, everybody would be millionaires a million times over
because it would be like 1+1 (apply the fixed laws)=2 (guaranteed
results).
What do you think?
POPULAR FOREX INDICATORS FOR TREND DETERMINATION
Not all people like using price action anyway, maybe including
you.
Now BTW: moving averages are notoriously popular with majority
of traders worldwide. They are simple and does not need a lot of thinking
to figure out how to use them.
If a price is moving above a moving average, then it is an
uptrend. If price is moving below a moving average, then it is a downtrend.
The disadvantage of moving average is they are a lagging indicator-meaning, price will have moved a lot before you see changes on the
moving average indicator.
Other trend indicators:
-MACD
-ADX
-RSI
Just google them and do your research on it if you want.
Thanks for stopping by this website.
PS:Did you enjoy this? It would mean the world to me if you
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Note:
Risk Disclaimer
All information is for educational purposes only. Nothing should be considered as a buy or sell recommendation. The risk of loss in trading stocks, commodity futures and options is substantial. Before trading, you should carefully consider your financial position to determine if trading is appropriate. When trading stock, futures or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. This email may is a paid advertisement. It could be for a product or service that is not offered, recommended or endorsed by Stock Alphabets and neither the company nor its affiliates bear responsibility or control over the content of the advertisement and the product or service offered. Proceed at your own risk.
The information and material contained in these pages and the terms, conditions, and descriptions that appear are subject to change without prior notice. Investments in equity shares, debentures etc, are not obligations of or guaranteed by the Stock Alphabets, and are subject to investment risks.
All information is for educational purposes only. Nothing should be considered as a buy or sell recommendation. The risk of loss in trading stocks, commodity futures and options is substantial. Before trading, you should carefully consider your financial position to determine if trading is appropriate. When trading stock, futures or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. This email may is a paid advertisement. It could be for a product or service that is not offered, recommended or endorsed by Stock Alphabets and neither the company nor its affiliates bear responsibility or control over the content of the advertisement and the product or service offered. Proceed at your own risk.
The information and material contained in these pages and the terms, conditions, and descriptions that appear are subject to change without prior notice. Investments in equity shares, debentures etc, are not obligations of or guaranteed by the Stock Alphabets, and are subject to investment risks.
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ReplyDeleteExcellent learnings and market prediction tips. Very good
ReplyDeleteNice explanation
ReplyDeleteReally Effective Strategy Thank You sir providing wonderful setup.. stay blessed Rahul sir
ReplyDeleteHi Rahul,
ReplyDeleteI’ve used this system in the past with good results, so in terms of recommending it, yes, I’d say go for it.
I am no longer using it anymore as I am now using only price action trading. The reason why I left it? My trading personality is not suited to this method.
Cheers
Mangi Madang