Forex - Trend
Signs of a trend:
- Each low is lower than the previous one in a downtrend, and each high is higher than the previous one in an uptrend.
- In the case of a trend, the upward or downward tendency is constant. For example, if looking at the hourly chart, a sharp price increase within a few hours is not a trend. However, if a constant price increase is wave-like, it can already be referred to as a trend.
- Price retracements in relation to its major movement are usually minor, and the price quickly comes back to its previous values.
We can also note some characteristics of a trend that are not mandatory but can be observed quite often.
- Trend often starts with a strong price impulse and ends in the same way.
- Before the opposite trend begins, the price often goes into a flat state, staying in it for some time. The given price behavior may be a signal for profit-taking.
Keep in mind that trends may differ in various time-frames. For example, a trend may move up on the daily chart, while falling on the hourly chart. In this case, the higher time-frame has a higher priority, but short-term bearish trades are allowed if focusing on the hourly time-frame.
Do not forget that the price can change its movement direction when it hits a significant level on the daily time-frame.
int TrendMA_Period = 13; // Averaging period for calculation. int TrendMA_Shift = 15; // Shift relative to the current barto compare the averages so as to determine the trend. TrendUp=(iMA(symbol,period,TrendMA_Period,0,MODE_SMA,PRICE_CLOSE,iBar)- iMA(symbol,period,TrendMA_Period,0,MODE_SMA,PRICE_CLOSE,iBar+TrendMA_Shift)>0); TrendDn=!TrendUp;
Higher Highs, Higher Lows, Lower Highs and Lower Lows
Determine if the market is making HH and HL or LH and LL: HHHL – Higher Highs and Higher Lows, LHLL – Lower Highs and Lower Lows.
Generally, in an uptrend you will see a fairly obvious pattern of HH and HL from the markets swing points, and in a downtrend you will see a fairly obvious pattern of LH and LL from the markets swing points.
Check the behavior of the price action after retraces and check it as it approaches the long-term moving averages such as 21 day ema (exponential moving average) or a key horizontal resistance level. Does the price action repel down as in a downtrend or bounce up as in uptrend? This kind of price behavior is a good clue to confirm the underlying bias / trend of the market.
Put a 200 and 50 day ema on your chart and check out the long-term slope of these ema.
This is a good quick way to identify the overall dominant trend of a market. Look at how prices are reacting near the moving averages (value zone), if the price is respecting those EMA levels and repelling/bouncing away from them on several occasions, there is good evidence the market is trending.