Identify the current market pattern, and set yourself up for success!
There are only 2 categories of charting price action: trends and ranges. Today, I’m chiming in with a smart tip about trends.
The cool thing about identifying a trend pattern is that it sets you up with an expectation about what comes next.
When the market is in an up-trending pattern, expect that a higher high is coming. Same is true when the trend is down – a lower low is coming and you can count on it. Why? There is only one reason!
Because… it’s a trend!
The nature of a trend is to make progress in one direction, so you can always expect a higher high is coming in an up-trend, lower low in a down-trend. I know what you’re going to say: “Eventually the trend will end! It can’t make higher highs forever.” Indeed not. This causes traders a lot of grief, but don’t worry, I got this.
How will you know the trend is ending? The answer has to do with the passage of time.
Everything in price charting
has to do with the passage of time.
When the market fails to make a higher high (or a lower low) for 20 bars or more, the trend may be losing steam. What comes next? It could be a deeper “retracement” phase, or maybe the next range pattern is on the way. Either way, when the trend stops making progress, it stops behaving like a trend so you can start expecting the next pattern is on the way.
There are many ways to trade a trend, but you’ll be more successful when you get in the habit of anticipating what comes next. If it doesn’t happen, that’s just as useful, because when a trend stops acting like a trend, you know it’s time to for change.
Make your trend trades more successful by identifying forex trend behaviors and mapping out your next move accordingly.