Awasmedia.com– Trends are a representation of market forces in the trading world.
Of course, going against the market is impossible. If you do not agree with the trend, it means you are hostile to the market.
Because going against the market is impossible, the only option is to follow where the market is going.
To achieve the best results, you must be able to recognize the current trend.
You will almost certainly have difficulty determining a position to enter the market if you do not have a good understanding of trends.
Unfortunately, trends are volatile and dynamic, so the trend will shift from time to time.
The trend itself has three movements: 1. Uptrends, 2.
- a downward trend, and
• P = Peak
T = Trought
• HP denotes a higher peak
• LP = Lowest point
• HT = High throughput
• LT denotes the lower trough.
The trend is classified into two types based on its type: major trend (also known as impulse) and minor trend (also called corrective).
Furthermore, in order to avoid feeling cheated, you must be able to identify potential changes in market direction. It’s possible that when you thought the price would continue to rise, it actually fell.
Or, when you think the market will reverse direction soon, it actually continues in its previous direction.
So, how do you spot changing trends?
1. Employ a trendline
What exactly are trendlines?
Trendlines are one of the technical analysis tools used in forex trading.
Trendlines, in addition to acting as support (in an uptrend) and resistance (in a downtrend), are one of the simplest tools for determining trend direction.
The break of the trendline, which can be an early indication that the price may change direction, is one of the characteristics of a trend change.
If the entire candlestick body that is formed is outside the trendline line, the trendline is considered translucent.
Trading with a trendline involves connecting the two lowest or highest points in an observed price movement.
There must be at least two connected peaks and bottoms for a valid trendline to be drawn.
2. Swing scenario with no failure
According to John J. Murphy’s book Technical Analysis of Financial Markets, “there are two conditions that can provide clues to the end of a trend.”
Non-failure swing and failure swing conditions are the two options.
A non-failure swing condition is one in which the price moves directly through the previous top or bottom point.
When the price breaks the previous peak (peak/top) or valley (trough/bottom), it indicates a trend change. Consider the following illustration:
Let’s start with image 1. What happens in the image above?
If you answer that the picture depicts a change in the trend’s direction from up to down, your answer is TRUE. Price was able to break through the previous bottom (A) and form a lower bottom (C).
The market then formed another peak (D) that was not higher than the previous peak (B), followed by a decline that broke through support (C) and moved towards point E.
What about the price movement depicted in Figure 2?
If you answered correctly, the process of reversing from down to up indicates that you answered VERY CORRECTLY. The price was able to break through the previous peak (A) and form a new higher peak (C).
At that time, the market formed another valley (D) that was not higher than the previous peak (B), in which the advance occurred, breaking through resistance (C), and moving towards point E.
Isn’t that simple? Then there’s the failure swing scenario.
3. Failure swing case
In contrast to the non-failure swing, there is no pull-back in the failure swing. The goal of swing failure detection is to look for strong indications of a price reversal.
Failure swings can occur when the indicator is overbought or oversold and indicates that the current trend is weakening, indicating that a trend reversal is possible.
Look at the image below to help you.
The image below depicts a situation in which, after the line broke through point C, the price quickly moved towards E with no further correction or pull-back.
However, when point D is on an upward trend, it is never higher than point B. Point D, on the other hand, is never lower than point B when it is in a downtrend.
Isn’t recognizing the Failure swing scenario simple enough?
4. Recognize the pattern of reversal
The reversal pattern is a price movement pattern that can provide a strong signal that the price is likely to reverse its previous trend.
By studying previous price movement patterns, you can forecast where the market will go next if the same pattern appears again.
If this pattern appears during an uptrend or a downtrend,
The final word
Maybe that’s all that can be presented to you all about this 4+ Easy Ways to Recognize Signs of Changing Trends in Forex Trading, hopefully it can be useful.