source: Cryptocurrency Action Research; mutiple sources
1. What is a trend in
forex trading?
For forex trading, a trend of any direction can be
classified as either a long-term trend, an intermediate trend or a short-term trend.
A long-term trend is composed of several
intermediate trends.
The
short-term trends are
components of both long and intermediate trends.
2. Chart Basics
(Trends): By Casey Murphy Investopedia
When a collection of data points are plotted on a
chart, you may start seeing the general direction in which a currency paid is
headed towards. In some cases, the trend is easily identified. For example, the
chart clearly shows that the currency pair is rising over time:
Figure 1 – USD/CAD
Source: Stockcharts.com |
On the other hand, there will be instances where
trend is much more difficult to identify:
Figure 2 -- USD/CHF
Source: Stockcharts.com |
Therefore, more commonly, trends tend to
operate in a series of gradually moving highs and lows. Thus, an uptrend is a series of
escalating highs and lows, while a downtrend is a series of descending lows and
highs.
Figure 3 is an example of an uptrend. For this to
remain an uptrend, each successive low must not fall below the previous lowest
point or the trend, if it does, it is deemed a reversal.
Types of Trend
There are three types of trend: Uptrends, Downtrends and Sideways/Horizontal Trends (The
latter occurs when there is minimal movement up or down in the peaks and
troughs). Some chartists consider that a sideways trend is actually not a trend
on its own, but a lack of a well-defined trend in either direction.
Trend Lengths
Along with these three trend directions, there are
three trend classifications that have to do with time duration in which the
trend is taking place. A trend of any direction can be classified as either a
long-term trend, an intermediate trend or a short-term trend. For forex
trading, a long-term trend is composed of several intermediate trends. The
short-term trends are components of both major and intermediate trends.
Take a look a Figure 4 to get a sense of how these
three trend lengths might look.
Figure 4 –
USD/CAD
|
Trendlines
Trendlines represent
a charting technique, which a line is added to represent the trend in a
currency pair. Drawing a trendline is as simple as drawing a straight line that
follows a general trend. Trendlines can also be used in identifying trend
reversals.
As you can see in Figure 5, an upward trendline is
drawn at the lows of an upward trend. Notice how the price is propped up by
this level of support. You can now see how this trendline can be used by
traders to estimate the point at which a currency pair will begin moving
upwards. Similarly, a downward trendline is drawn at the highs of the downward
trend. This will indicate the resistance level that a currency pair experiences when price
moves from a low to a high. (To read more, see Support & Resistance
Basics and Support And Resistance
Zones - Part 1 and Part 2.)
Figure 5
|
It is important to be able to understand and
identify trends so that you can trade and profit from the general direction in
which a currency pair is heading rather than lose money by acting against them.
Now that you know a little about candlestick charts and trend, we can introduce
you to one of the most popular chart patterns: Head and Shoulders.
Read more: Chart Basics (Trends) https://www.investopedia.com/walkthrough/forex/beginner/level3/trend.aspx#ixzz5ELt2J63c
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3. Identify trend change?
In
the case when a downtrend changes direction to an uptrend the market should be piercing the
most recent lower high and then making a higher low than the previous one.
Trend identification and identifying a change of trend is
the easier part, but the problem comes to identify the start of a sideways market. Aug 9, 2017.
4. Trend change indication? If Bearish;
lower lows & lower highs, if Bullish higher lows and higher highs.
5. What are
Higher High, Higher Low, Lower High and Lower Low? http://b4gen.blogspot.com/2018/04/cryptocurrency-what-is-higher-high.html
Lower High and
Lower Low suggests Bearish Swing:
Higher High and
Higher Low suggests Bullish Swing:
Usually when traders talk about higher highs
etc, they are referring to swing highs and lows
HH and HL indicate a bullish trend
LH and LL indicate a bearish trend
As you can see on the chart the uptrend had some nice clear swings
The boxes are trading ranges and H or L contained in a range are not so significant because they are periods that the markey is moving sideways. However, with a breakout in the direction of the trend, as with the second box, the high of the range can be seen as a HH and the low of the range, a HL.
In the downtrend that followed the H and L are not so clearly defined, but they are there.
HH and HL indicate a bullish trend
LH and LL indicate a bearish trend
As you can see on the chart the uptrend had some nice clear swings
The boxes are trading ranges and H or L contained in a range are not so significant because they are periods that the markey is moving sideways. However, with a breakout in the direction of the trend, as with the second box, the high of the range can be seen as a HH and the low of the range, a HL.
In the downtrend that followed the H and L are not so clearly defined, but they are there.
Even with
the best of strategies, Lower High and Higher Low almost always
translate to your High Risk retail order, very rarely will you hit the ding,
while the computer is programmed to always move away from your order to a rock
bottom Lower Low or
climactic peak Higher High some
10 to even 100 plus points from your order line using an enormous wholesale
hedge cushion where the insiders feast off your order with a Low Risk trade.
Seriously, Nobody beats the computer except for a very few with insider access.
6. KEYNOTE: Sideways,
equilibrium pattern, between highs one low is required, where trend breaks to
turn (#); bull to bear or bear to bull, it is trend alert point. See also trade
of same chart for 15m trade.
****
Buy the Higher Low and Sell the Lower High
https://www.dailyfx.com/forex/education/trading_tips/chart_of_the_day/2013/05/02/Buy_the_Higher_Low_and_Sell_the_Lower_High.html
Article Summary: Trading in the direction of the trend and
buying low while selling high are mutually exclusive. Because we recommend you
locate the direction of the trend and find a good entry, DailyFX has a new
concept for you to consider. Buy the higher low and sell the lower high. This
article will provide you with methods to do just that to prevent you from
catching a falling knife.
If
you’ve ever heard a trader say that price can’t possibly go any lower, chances
are they haven’t been trading for long. That’s not meant to be harsh but simply
to say, no trader knows the future. What traders can do is recognize that
patterns tend to play out and repeat over and over again which can lead to
higher probability entries.
Learn Forex: Buy Low & Sell High Is Cute But
Ineffective
Chart
Created by Tyler Yell, CMT
One of
the principles of every trader who enters an order, whether long or short is
that they believe they’ve entered at a good price in relation to where they
expect the market to go. One trader will be right and the other will be wrong
if they entered at the same price with similar stops and limits. While there is
no guarantee which trader will be profitable and which won’t, there are some
things we can do to put the odds in our favor.
Learn
Forex: Buy the Higher Low with Bullish Trend Lines or Rising Channels
Chart Created by Tyler
Yell, CMT
Learn
Forex: Sell the Lower High with Bearish Trend Lines or Falling Channels
Chart
Created by Tyler Yell, CMT
Methods
to Help Prevent Buying a Low Before It Goes Lower
As stated at the beginning of the article,
there is no crystal ball or Holy Grail. However, there are methods that you can
use to stay on the likely right side of the big moves. The three methods we’re
going to look at are pivot lines to identify support and resistance, RSI to
understand directional strength, and trendlines or directional channels.
The purpose of these three methods is to help
you avoid buying something that’s falling. On the other hand, selling something
just because it’s rising can become a fool’s game as well. That’s why studying
price action can give a big leg over investors or traders who feel price “can’t
go any lower”, which has been the rallying cry of many losing trades.
Pivot
Linesfor Support & Resistance
Pivot Lines are a leading indicator of sort. In
short, Pivot Lines are
a famous indicator to help you forecast likely future points of
resistance and support to limit risk and find profit targets. Rising Pivot
levels overtime can help you find a significant higher low to enter a buy trade
or lower high to enter a sell trade on.
Learn Forex: Pivots
Clearly Paint Dynamic Levels of Rising Support for Entries Zones
Chart Created by Tyler Yell, CMT
Knowing that the Holy Grail doesn’t exist,
Pivots are a helpful way to get a feel for the directional bias. Combining pivots
lines with candlestick analysis is a preferred method of
many traders to find strong entries with the trend. A short cut for new traders
looking at price action is to fade long wicks (highlighted above) against the
trend as they likely are a rejection of a price test and often end up carrying
back price in the direction of the trend.
Relative
Strength Index (RSI) for Directional Strength
The Relative Strength
Index is the utility knife of many traders.
When the RSI crosses an extreme level and is making directional moves higher or
lower, traders can look for strong entries that favor the RSI bias. One simple
way to find a directional bias on RSI is to add a moving average or trendline
to the RSI and find bounces off support or breakouts of the RSI for a high
probability entry.
Learn
Forex: RSI with Moving Average Added For Directional Bias
Chart Created by Trading Central
Rising or
Falling Trendlines or Channels
Trendlines and
channels are nice and simple. The value of a trendline or channel is increased
every time it is tested. When markets are moving higher a trendline is a form
of support that can be used to identify buying opportunities. When markets are
moving lower, a trendline is a form of resistance that can be used to identify
selling opportunities.
The purpose of this article is to help you
understand that buying low and selling high is not a given trading system. You
may be buying something that’s about to go a lot lower or selling something
before it skyrockets. Because price is the ultimate indicator, trendlines or
channels can help you pinpoint a higher probability entry as opposed to a cheap
entry which could end up costing you a lot if it continues to move against you.
Learn
Forex: There Is No Guarantee you’ll get the Lower High You Want
Closing
Thoughts
Finding a
directional bias through the methods above can help you pinpoint entries. There
is nothing wrong with buying a low or selling a high as long as it’s in the
direction of the prevailing trend. Trading against the prevailing trend is
often more trouble than it’s worth so we recommend identifying the trend and
then entering on opportunities with the trend.
****
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