How to correctly determine the trend on the chart of any trading pair? Indeed, in order to identify it, an indicator is not needed; this can be easily done visually - just by looking at the chart.
We all remember that the market tends to move in three directions:
- Up (Bull trend);
- Down (Bearish trend);
- Flat (sideways).
If the price moved in a certain direction (up or down) at a certain interval, then you have a trend.
How to learn to identify a trend?
To learn how to correctly determine it, you need experience, which can be expensive. And without it, alas, nothing. However, theoretical knowledge can increase your chances of success.
As you know, a trend shows bullish or bearish dominance. If an uptrend is visible on the chart, then the bulls are stronger. If there is a downtrend pattern, then the bears win in strength.
Most traders open the daily chart as the main and defining trend. It will show the general daily trend, with which you can determine the reversal and the beginning of a new trend.
If you open, for example, an hourly timeframe, you can see that the price goes against the general, daily trend. In this case, according to statistics with a probability of 70%, such a movement will be unsuccessful and the daily trend movement will continue.
Short-term trends move in line with long-term ones, thereby increasing the number of good entry points that bring you the desired profit. Therefore, it is very important to view and analyze different timeframes.
It is worth remembering that the longer the time period (timeframe), the more reliable the trend is. Weekly and monthly trends are much more reliable than 30-minute or hourly trends.
The beauty of binary options is that profits can be made in a short time with transactions from 3 minutes to 10. Therefore, you do not have to analyze monthly trends and enter weekly ones with an expiration time of 10 hours.
There is not much difference whether you trade on a monthly or hourly basis, the only difference is that it takes longer to wait for profit.
Determining the trend on a clean chart without indicators
A clean chart means the absence of any indicators, with the possible exception of lines that are needed more for beginners. If you kill enough time to gain experience, then it is much easier to determine both the trend and the entry point on the bare chart.
The oldest and easiest way to visually identify a trend is to line up highs and lows.
- Maximum is the highest local point for a certain period of time.
- Minimum is the lowest local point for a certain period of time.
Uptrend sounds like this: If the new high and low are higher than the previous ones, then it is an uptrend.
Downward sounds like this: If the new high and low are lower than the previous ones, then it is a downtrend.
Let's conditionally denote the highs (HH - higher high) and lows (HL - higher low) for an uptrend.
We also denote the highs (LH - lower high) and lows (LL - lower low) for a downtrend.
In this picture, we see what the phrase “low and high below the previous ones” means (downtrend, lows and highs are indicated by red circles).
Exactly like the phrase “low and high are higher than the previous ones (uptrend, lows and highs are indicated by blue circles).
Green indicates the breakout point, indicating a possible trend change. Why possible? Because this is a market, it doesn't care about traders' forecasts.
A trend can start and end immediately, or it can last a month. However, the probability of a rebound will always be, as will always be the traders who successfully earn on this.
Those traders who make money often do not get hung up on one movement, they look at the previous information about the market on large timeframes and adjust to the current situation, because they understand that the situation on the market can change dramatically in a few seconds.
Again we touch psychology. Do not try to control the market and look for a "super strategy" that will work on 100%. Its existence is highly doubtful. Learn to control yourself, survive unprofitable days and you will start making money in the market.
Let's look at the same situation as above, only on a real chart. This example is very good, it is not always the case in the market. It often takes months of trading and experience to determine it. You should spend a lot of time on this, as a reward you will be able to start making money in the market.
The first step is to identify the highs and lows. This can be done using trend lines. For example, the general direction of the market is up, you look at the highs and lows, if they are higher than the previous ones, then this is definitely an uptrend.
If the overall movement is down, the highs and lows are lower than the previous ones, then you are observing a downtrend.
Sometimes it happens that all the points are approximately on the same level. In this case, there is no trend on the chart and consolidation occurs. On which you can also make good money, but more on that later.
Important point: It concerns entry points (the place where to open a trade). In a downtrend, it is best to go down from the highs (down), and in an uptrend from the lows up (up). If you are a beginner, this will greatly increase your chances of success.
Of course, an experienced trader often enters from both the high and the low. If he trades in an uptrend, then from the highs he goes down for a short time, and from the lows, for a longer time, up. However, don't play it if you don't have much experience with it.
Another important point, from my own experience. No need to rush to enter the trade. It happens that on the same signal, one trader earns, another merges. One knows how to wait for a real maximum, the other is in a hurry. Everything will come with experience, everyone had it.
A little bit about strong trends
It often happens that after a strong trend, the market falls into consolidation (flat) and goes in a certain range. “Scalping” works well here, but more on that in another article.
It is important to remember that sooner or later the market will come out of the consolidation and follow the trend, giving traders new opportunities to make money.
Trade, gain experience and don't forget to withdraw your money! Oddly enough, this is one of the most common mistakes traders make.