Understanding Trends ~ forex news spike trading ea
What I will discuss today is understanding trend. I still have one or two things to discuss before finally discussing my current trading style.
Understanding trends
Many traders find it very difficult to understand trend. The simple truth is that you can only understand trend if you follow the weekly time frame. What most traders dont appreciate is that if a trend is up in the higher time frame it can remain up so for a month, 4-5 weeks, 35 days etc. Your chance of success will increase significantly if you trade in the direction of weekly time frame using the lower time frames to enter into trade. Put differently, if the weekly trend is down, your best bet is to sell the pull backs at least until price moves in that direction by about 900-1000 pips. On the other hand, if the weekly trend is up, the most profitable thing to do is to buy on the pull backs at least until price moves in that direction by about 900-1000 pips. Let me illustrate my analysis of the price action from in the last five months;
a) In April price the highest point for the year at 1.67460
b) Between May and July price fell by about 1000 pips to 1.5780 and pulled back to 1.6618 (838 pips) and present fell to a current low of 1.57050 (913 pips so far)
c) The monthly support and resistance are the horizontal red and yellow lines.
The above analysis is simplu a guide and had nothing to do with understanding trend. To have a proper understanding of trend, let us look at price action on the weekly time frame.
a) In terms of weeks, the fall was completed by 10 weekly candles and the rise by about 5 weekly candles
b) In terms of daily time frame about 35 candles
c) in 4 hours time frame perhaps hundreds of candles
I attach the monthly, weekly, daily and H4 charts as usual.
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