Simple trading tips for swing traders to spot trend, reversal
Here’s a simple way to visualise trend. Recall that trend is made up of a series of highs and lows. Higher highs and higher lows make an up trend while lower highs and lower lows make a down trend. Relatively simple rule but application is not exactly straight forward.
In this MT4 chart of Hang Seng Index HSI where week-week price action is shaded in boxes, one can see that there are very clear signs.
Tip #1 – Bears look for lower weekly highs
Don’t worry if the market will keep getting lower, just make sure there is a lid on price i.e. don’t make highs. Why? Because a new price low makes a bear happy but a new price high is the thing that makes a bear lose sleep at night.
Tip #2 – Bulls look for higher weekly lows
This is the opposite of Tip #1. A bull must check all the time that the floor is not falling out under him. There is probably a motto here “Keep your eyes on your risk and don’t count your chickens before they hatch”.
Tip #3 – When does trend change?
Trend changes when existing high and low sequence is terminated. In a down trend, price going higher this week compared to last is a sign that trend is over. In an up trend, price lower than last week says the same.
Tip #4 – What happens when highs and lows go sideways?
That’s a consolidation.
How do I put this into trading?
Tip #5 – Place your stops at critical levels
If you are the gung-ho type of swing trader who is calculating to ride your trade for weeks in order to maximise profit, previous week’s levels are the best ones to place your stops. They don’t reprint and when you get stopped its for a very good reason because that’s when prices are really going to reverse.
Tip #6 – Spot trend by drawing boxes
Drawing boxes is a very simple way to tell trend. Metatrader MT4 has a built-in feature called ‘period separator’ that is superb for this purpose. Read more about it here.
Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.
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