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How to identify the end of an existing trend and the begginning of a new one?
Good day Everyone i really love the way traders questions are solved and tackled and i must say am really happy for that ,
There is something that keeps bordering me each time in my trading and that is knowing the end of an existing trend and the begginning of a new one
please i really need your help on this as my tradings keeps getting bad when am on the wrong trend
Thanks so much for all your help and look forward to hearing from you guys.
over 2 years ago
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There are many ways to determine whether a trend is over. For one, you could use charts patterns. Head and shoulders, double top/bottom, triple top/bottom, etc. You could also look at major trend lines. You could consider a trend broken once a falling or rising trend line breaks. However, it doesn't mean that the trend has reversed, as it could mean that price is now ranging. Interpreting candlestick patterns is also a great way to determine whether a trend has ended. You could look for "tired candles" like dojis and spinning tops. You could then pair these candles up with major support and resistance levels to see if buyers/sellers are truly exhausted.
over 2 years ago
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As forex ninja has said, there are many human inventions, using techinical analysis, to identify a trend. You can also identify trends by gauging market sentiment, you can also use interest rate expectation to identify a possible trend. A currency with rising interest rate attracts investors in a normal market condition, and that is bullish for the currency. Say if the bank of canada comes out in the next meeting with a decision to raise the interest rate and speaking hawkish, that could spark a buying trend for the canadian dollar that could last for some times. The uptrend could come to an end when traders think the central bank might cease hiking rate, that could be an exit of the rising trend.
over 2 years ago
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In addition to those mentioned by forex ninja and boripat, you could also make use of technical indicators such as oscillators (stochastics, rsi) or momentum indicators (macd, moving averages). Oscillators are leading indicators, which means that they signal when a reversal is about to occur. Momentum indicators, on the other hand, are lagging indicators, which means that they confirm when a reversal is taking place. You could combine the use of an oscillator with a momentum indicator in order to avoid getting faked out.
over 2 years ago
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Other people also make use of the parabolic sar to help distinguish the beginning / changing of a trend. Keep in mind though that you shouldn't use just one indicator by itself. Try combining different indicators and back test to check how accurate the combination is in identifying when trends change.
over 2 years ago
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ForexNinja
Tying up fundamentals with technicals is always good!
over 2 years ago
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