ien017 {3 Powerful Techniques to Determine Trend Strength (No Indleators) 3 Powerful Techniques to Determine Trend Strength (No Indicators) £ Free Forex Trading Lessons / By Justin Bennett / 14 COMMENTS: 8 Every trader wants to know how to identify trends and determine their relative strength. It's what allows us to trade with momentum rather than against it, which in turn increases the odds of a favorable outcome. Unfortunately, gauging the strength of a trend isn't as straightforward a task as some would hope. plicaiypriceaction comvfree-orextrading-lestons!3-powerlu-techniques-delermine-rend-trangth a2rienot7 2 Power Techriqus to Detemine Ten Sens (N nests) Let me rephrase that, the plethora of indicators and techniques that have flooded the financia world over the years have unnecessarily convoluted a relatively simple task. But | digress... Yes, it is a simple task. Is it easy? Well, that depends on the techniques and tools you dec to use. There are three very simple techniques that | will show you today that, with enough pract will make determining trend strength a much more manageable task By the time you finish reading this lesson, you will have a firm understanding of trend characteristics as well as when to know whether to look for a continuation of the current tren or an imminent breakdown. Let's get started! » Price First and foremost, we need to know how to identify a trending market. Traders have complicated the topic for years, but it’s very simple, | promise. A trending market is one that is making higher highs followed by higher lows or lower lows followed by lower highs. That's it. If we transform that statement into its visual equivalent, we get the following illustration. plicaiypriceaction comvfree-orextrading-lestons!3-powerlu-techniques-delermine-rend-trangth 2122ien017 {3 Powerful Techniques to Determine Trend Strength (No Indleators) Uptrend Higher highs Higher lows oa Pevecawtltila. » Price aN Lower lows Downtrend Pretty basic stuff, right? Thought so! But before you leave thinking you know about the concept of higher highs, higher lows, etc., there are some concepts later in the lesson that may not be familiar to you. In fact, | would be hplieaitypriceaction conviree-orex-lrading-lestons!3-powerlu-echniques-delermine-trnd-trangth 22ien017 {3 Powerful Techniques to Determine Trend Strength (No Indleators) that 90% of Forex traders don't know to look for what I'm about to show you. In other words, you may want to stick around Now comes the fun part ~ taking this very basic concept of highs and lows and turning it inta actionable information. For that, we turn to the most basic principle of technical analysis. 1. The Highs and Lows Tell the (Whole) Story Let's start things off by just visualizing where the highs and lows on a chart have formed over a period, In short, the relationship among highs and lows as they form over time. All we are doina with this techniaiie is ahservinn where the evtended ewina hinhs and laws ad Price Ine GBFUDU ally chart peIow Is a pertect example or now someining as simple as watcning how the highs and lows of a market interact with each other can signal a change in trend. hplieaitypriceaction conviree-orex-lrading-lestons!3-powerlu-echniques-delermine-trnd-trangth 4122{3 Powerful Techniques to Determine Trend Strength (No Indleators) Fstiowerhigh-sgn thatthe ‘ment ena hang . i | ty \ i Wt | hy, ( | ib db nae es \ Notice how over the course of several months, GBPUSD carved out somewhat of a rounding ton. which is a valid technical pattern. However. for ourposes of this lesson. we're onlv ad Price He Ullal avUVE, WE ISUIUWe! My wad Ure HSL SIyH Wat ure UpuerU was BeyHIMY Le fatigue. But it wasn't until the first lower low that we had a telling indication that the current trend had reversed. Free Course: "Trading Pin Bars for Consistent Profits" (Valued at $100) Enter Your Email plicaiypriceaction comvfree-orextrading-lestons!3-powerlu-techniques-delermine-rend-trangth 522ret? 2 Power Techriqus to Detemine Ten Sens (N nests) Keep in mind that trend changes wor't always be this obvious. But the signs are always there you may just have to look a bit harder to find them in some instances. At this point you may be thinking, this is great and all, but how/where do we enter short? For that, we need the highs and lows to interact with a key level in a way that offers a favorable setup. In other words, we need to turn the price action you see in the chart abo’ into actionable information. 2. Distance Between Subsequent Retests: A Killer Way to Determine Trend Strength Now that we have discussed how to use swing highs and lows to gauge the strength of a trend, let’s add a key level into the mix. ad Price Someone at some point in time came up with the notion that support and resistance levels become stronger with each additional retest. | hate to be the bearer of bad news, but that's a complete and utter fallacy. Multiple retests of the same level make that level more visible, they do not make it stronger. And visible and strong are by no means synonymous Think about it, if this were true - that a level became stronger with each additional retest ~ it would theoretically never break. Because if it didn’t break on the third retest, why would it break on the sixth when it's supposedly twice as strong? hplieaitypriceaction conviree-orex-lrading-lestons!3-powerlu-echniques-delermine-trnd-trangth 22ien017 {3 Powerful Techniques to Determine Trend Strength (No Indleators) It doesn't add up. So if we can agree that multiple retests of a given level do not make it stronger, we can naturally conclude that it makes the level weaker, right? Well, not quite. While a market that continually revisits the same area can eventually brea through, we don't have enough data to conclude that it is likely. For that, we turn to (you guessed it), highs and lows. More specifically, the relationship th highs and lows have with our key level. The illustration below shows a trending market that is respecting a trend line, however, the distance between each retest has become shorter over time. ad Price Note how the market tested this level as support on four separate occasions since its inception. What many traders tend to dismiss, however, is the shorter time span between eac retest as the trend extended higher. The likely outcome for this type of price action is as follows: hplieaitypriceaction conviree-orex-lrading-lestons!3-powerlu-echniques-delermine-trnd-trangth 122ien017 {3 Powerful Techniques to Determine Trend Strength (No Indleators) Why does this happen? ad Price At the same time, supply increases as market participants unwind their positions to book profits. In the case of the illustrations above, that demand is drying up more quickly with each subsequent rally from trend line support. Thus, we get a market that begins spending more time trying to keep its head above water than making higher highs. Of course, this concept also applies to a bearish trend where demand increases and supply decreases as prices drop The EURUSD daily chart below is a perfect real-world example of a currency pair that began testing support more rapidly over the course of 256 days. hplieaitypriceaction conviree-orex-lrading-lestons!3-powerlu-echniques-delermine-trnd-trangth 22ien017 {3 Powerful Techniques to Determine Trend Strength (No Indleators) WV Niel con tN aye Sa re AN Xn Notice how each rally spent less time away from support as the trend became extended. ad Price If we want to get fancy, we can combine the two techniques we just discussed to further the conviction that a breakdown was imminent. plicaiypriceaction comvfree-orextrading-lestons!3-powerlu-techniques-delermine-rend-trangth 922ien017 {3 Powerful Techniques to Determine Trend Strength (No Indleators) support | will be the first to admit that the pair was not making lower highs before the technical break. However the fact that a ricina wadna farmad indinatas that aach eiheaniiant rally had lace ad Price 3. Clustering Price Action: An Early Warning Sign Last but not least is when price action clusters near a key level. In some ways, this is a combination of the two techniques we just discussed. | often call this “heavy” price action. The idea of heavy price action is something my members have become very familiar with over the years. As the term implies, this is when a market begins to put constant pressure on a key level over a short period. | suppose I should come up with a better word for it since the word heavy only applies toa pair that is putting pressure on a support level. That would make the opposite “light” price hplieaitypriceaction conviree-orex-lrading-lestons!3-powerlu-echniques-delermine-trnd-trangth 10122ien017 {3 Powerful Techniques to Determine Trend Strength (No Indleators) action, which doesn't have the same ring to it. (('ll save that for a later discussion with my members.) At any rate, the idea here is to watch how the market responds to support or resistance withir a given period. A typical period would be a few days or maybe a full week if trading from daily time frame. If the market begins to cluster or group for an extended period at a key level, chances are trend is about to break down and reverse. The illustration below shows what this looks like for a market that is in an uptrend. Price action clustering at key support nN ad Price Notice how, toward the latter half of the trend above, the market began to cluster just above support. This type of price action leads to a breakdown more times than not The AUDJPY weekly chart below is a perfect example. hplieaitypriceaction conviree-orex-lrading-lestons!3-powerlu-echniques-delermine-trnd-trangth n22ien017 {3 Powerful Techniques to Determine Trend Strength (No Indleators) ~ A Wyn WA | can't tell you how many times I've seen this happen at significant support levels. Linfartinatahs thaan wha hauan't dana thair hamauarl find thameahine antarina in the 2» Price But don't be tooled into thinking this technique Is only usetul on the weekly chart. It can, in fact, be extremely powerful on just about any time frame, even the 1-hour chart. plicaiypriceaction comvfree-orextrading-lestons!3-powerlu-techniques-delermine-rend-trangth 1202ien017 {3 Powerful Techniques to Determine Tren Strength (No Indleators) "Heavy" price action weighing on channel support Notice how quickly the market bounced the first 3 times ad Price The annotated chart above is the same one | posted inside the member's area on November 19, 2014. Once again, notice how the price action became heavy toward the latter half of this ascending channel, a clear indication that the bullish momentum was not only tiring but that a break was imminent. The AUDUSD 4-hour chart below paints a fairly bleak picture of what happened next. The result of the breakdown in the chart above was a 680 loss over the next 30 trading days. hplieaitypriceaction conviree-orex-lrading-lestons!3-powerlu-echniques-delermine-trnd-trangth 1322ien017 {3 Powerful Techniques to Determine Trend Strength (No Inleators) ong (heavy) ad Price enuy, ungerstanaing now clustering price acuon can 1eaq to a break will neip you avoia being ‘on the wrong side of a trending market. Final Words Determining the strength of a trend doesn't need to be a complex operation. Something as. simple as the three techniques discussed above are all you need to gauge whether a trend is likely to continue or break down. Keep in mind that all three techniques above are as useful in bearish markets as they are in bullish markets. The charts and patterns above were only used to maintain a consistent theme throughout the lesson, but the techniques discussed above can be utilized in any market and on any time frame. hplieaitypriceaction conviree-orex-lrading-lestons!3-powerlu-echniques-delermine-trnd-trangth a2rienot7 2 Power Techriqus to Detemine Ten Sens (N nests) The best thing any trader can do for themselves whether they are attempting to decipher tren strength or identify key levels is to get back to basics. Every market has its story to tell, and every story can be translated using swing highs and lows. As | often say, your job as a trader is not to know what will happen next. Rather, your job is to gather the clues the market leaves behind and assemble them in a way that stacks the o your favor; and every possible clue is born from the natural ebb and flow of the market. Your Turn How do you currently determine the strength of a trending market? Will you be adding any of the three techniques above to your trading arsenal? Share your opinion, leave some feedback or ask a question below and I'll be sure to get back to you. ad Price Free Course: "Trading Pin Bars for Consistent Profits" (Valued at $100) Email plicaiypriceaction comvfree-orextrading-lestons!3-powerlu-techniques-delermine-rend-trangth 15122ien017 {3 Powerful Techniques to Determine Trend Strength (No Indleators) Share f om vow SF shane Leave a Comment: Name * E-Mail * £ Website Comment e ® Pin » Price 61 Share: fs Post Comment 14 comments Farzin Sb says Hi, Thanks for this lesson . the problem in detecting market direction is not as simple as drawing some channels and seeing the bounces. for example on gbpusd in recent days. there was a decending channel. but it broke out of channel for 2 days. then it came back inside the channel. ( maybe a false breakout ) but again before reaching the bottom of that channel it turned plicaiypriceaction comvfree-orextrading-lestons!3-powerlu-techniques-delermine-rend-trangth 1622rienot7 2 Power Techriqus to Detemine Ten Sens (N nests) direction. so on the very last candle that u want to enter a trade u won't know what will happen. seeing higher highs and lower lows on passed candles does not act perfectly on the upcoming candles. for example | place a sell on gbpusd it goes higher. | close that and place a buy , and it drops ! some how the market or broker apps are designed intelligently to hit our stops then rotate! + Reply Justin Bennett says Farzin, you're welcome. And you're right; there is no perfect way of identifying trend strength. Then again, “perfect” doesn't exist in the world of trading. The best we can do is use the price action on our charts to determine the most likely outcome. 2» Price stuck ina range. » Reply Terry Bill says Lately, the intra-day trading is more into vogue because it doesn't add swaps to your positions and particularly keeps away the overnight risks. The major benefit of Intra-day Forex trading is-a trader can make the potential trades in the news hours, keeping up with the liquidity in his account and can have extra competent check on trades. Therefore, more of the expert traders are inclined towards intra-day trading. The technical analyst's studies online Forex charts plicaiypriceaction comvfree-orextrading-lestons!3-powerlu-techniques-delermine-rend-trangth s7e22n9no17 {3 Powerful Techniques to Determine Trend Strength (No Inaeators) and uses the past market action to achieve their foremost goal- forecast a price or trend movement. To predict the drift and the movement of the currencies most of the traders make analysis on the Forex chart. | am Trader since 2014 and I believe Trend Following Chart Patterns like Triangles, Pennants, Flags, Rectangle. Also Trend Reversal Patterns Like Doji Hammer, Shooting Star, Head & Shoulders... » Reply Justin Bennett says Terry, | believe there will always be those who prefer intraday charts over the higher time frames and vice versa. It's a hugely personal decision and one that usually takes years to form, ad Price Sam says Been on here for almost 3 hours, reading price action techniques and even links in between each post. Really insightful Justin, thanks. Reply plicaiypriceaction comvfree-orextrading-lestons!3-powerlu-techniques-delermine-rend-trangth sa22ien017 {3 Powerful Techniques to Determine Trend Strength (No Indleators) Justin Bennett says Sam, you're welcome. Let me know if | can be of any further help. Cheers. > Reply Lakeside says Nice one and very explanatory, | used the clustering P.A to catch a big move on (USDCHF, M30) and it was good. | hope i could share a pic on here * Reply 2» Price Nice! Once you know what to look for it becomes relatively straightforward. Thanks for stopping by. » Reply eddie-umoh says i like the simplicity of your explanation, i have learnt something from these thanks plicaiypriceaction comvfree-orextrading-lestons!3-powerlu-techniques-delermine-rend-trangth 1922rienot7 2 Power Techriqus to Detemine Ten Sens (N nests) am a new biz i will also like to received lots of training from u can u help me out ? > Reply Justin Bennett says Eddie-umoh, glad I could be of help. You can learn more about my Forex course and community here http://dailypriceaction.com/forex-price-action- course. 2» Price Norm says HiJ, Thanks for the lesson. On The GBPUSD chart above circle #7 forms the first lower low but it seems it was overlooked and instead circle #9 was apparently cherry picked as the first lower low. Likewise there were a series of lower highs forming a cluster between circles #7 and #8, yet #8 was labelled as the first lower high. | am not familiar with this method of selecting highs and lows. Can you expound further? plicaiypriceaction comvfree-orextrading-lestons!3-powerlu-techniques-delermine-rend-trangth 20122ien017 {3 Powerful Techniques to Determine Trend Strength (No Indleators) Norm > Reply B Justin Bennett says Norm, I'm not sure what you'te referring to. | chose the most obviou: swing highs and lows in the charts above. Like everything else, there some interpretation involved, but | certainly didn’t cherry pick anythii for purposes of this lesson. Cheers. » Reply ad Price very informative, thanks but i,m a bit struggling on to identify the levels in a correct manner. + Reply suresh says Dear Master, Couldn't resist myself to stop posting this comment. It's simply great.\ I'm 3 months old with trading ... would say I just started, hoping to see you soon. plicaiypriceaction comvfree-orextrading-lestons!3-powerlu-techniques-delermine-rend-trangth 21122ien017 3 Powerful Techniques to Determine Trend Strength (No Indicators) Thanks, Suresh > Reply Acc Your Reply jet Trade Setups Disclaimer: Any Advice or information on this website is General Advice Only- It does not take into account your personal circu any material or using the information within this site you agree that this Is general education material and you will not hold any persor advice provided here by Daily Price Action, its employees, directors or fellow members. 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