2 minute read
How to identify a change of the trend ?
by expertmagic
HOW TO IDENTIFY A CHANGE OF THE TREND ?
The end of an uptrend is marked by the failure to create a higher high points .Look at the image below: What you need to understand is that In that instance , price is no longer intersting for buyers and buyers are taking their profits and now price now is in a strong longterm supply area interesting for sellers.
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1. In a first instance price is making higher highs and lowe highs, we say that BUY order flow volume (BOFV)> SELL order flow volume( OFV)
2. However, The price does not create any other higher lows. Price fail to respect the structure to the upside. Some external force drastically changed the market behaviour . Price is potentially arround expensive areas= attractive for sellers: big supply levels
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3. Finally price breaks down and uses an old lower low points as a resistance to create lower lows and higher lows (beginning of a downtrend). In other words demand levels are no longer interesting for buyers. In that case those zones will be absorbed
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1. In the first instance , price makes lower lows and lower highs (downtrend structure)= sell order flow volume > buy order flow volume 2. The Price fail to continue the structure and does not create lower lows. Inbalance between buyers and sellers : some external force drastically changed the market behaviour. Price is potentially around cheap areas : Big Demand levels 3. Finally , The price breaks up and uses one higher point as a support to create new highs and higher lows (beginning of an uptrend)= buy order flow volume > sell order flow volume.
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If we follow these steps, it is possible to objectively determine when the price turns and changes the trend. It's really important to understand that the rapid adaptation to market conditions will help us know what action to take.
Logically, the identification of these changes will not be easy at the beginning. We invite you to do with your graphics to train you, we must be able to train our brain to recognize the movements and the price structure, because experience and exposition to charts is the essence of trading.
Trading is based largely on the training of the eye. Every single time you analyze your charts start by doing that. Do not overcomplicate things Here is an example:
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