Resolved Question
Confirming daily trend change
I'm using a system where I trade in the direction of the daily trend. Just like to know what classifies as a change in the direction of the trend (I'm using only trend lines, support/resistance and stochastic in my system). Is it simply a close above/below the trendline on a daily chart. Or is it a close above the trendline and also the support/resistance line.Thank You
about 1 year ago
Best Answer - Chosen by Asker
You could look for a breakout from a trendline but I'd wait for a pullback and look for a bounce off the same trendline for confirmation. You want to make sure there's a role reversal (support turned resistance / resistance turned support).
I know you might now want to add another indicator, but I'd recommend using a fast and slow moving average and look for crossovers to detect trend changes.
Instead of Stochastic, you could also try ADX. Stochastic is an oscillator and usually used for ranging markets. You can also use it to detect a trend but it works on mostly super strong trends where Stochastic will remain extremely overbought (way above 80) or extremely oversold (way below 20) for an extended period of time. Once Stochastic falls back below 80 or above 20, it could signify a trend change.
about 1 year ago
Answers (2)
Going along with the trend is a simple but profitable way of trading, in my opinion. To know whether a trend has change, I usually look for reversal patterns. Double/triple bottoms, cup and handle, and inverted head and shoulders formations are bullish reversal patterns. Conversely, double/triple tops, and head and shoulders are the bearish ones. To learn more about these patterns, kindly click the link below. Thanks!
about 1 year ago
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A simple way of identifying trend is as follows. When price has made a high relative to a previous high, and a higher low relative to a previous low, it can be said to be in an uptrend. The reverse is true for a downtrend. Normally in an uptrend, when price is making a series of higher highs and higher lows, you'll want to buy a retracement to support, anticipating the next higher low. In a downtrend you'll want to short when price pulls back to resistance.
about 1 year ago
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