Trend analysis may be among the very troublesome activities a trader needs to face. Analysis may get convoluted owing to many different unique graphs, timeframes and technical signs. Easy and simple way to uncover leadership is to have a rapid walk down the graph and begin marking off highs and lows. We can set an up trend by finding price printing higher highs combined side greater highs. The faculties of a downtrend are the alternative. Downtrends will specifically search for price actions to print reduced highs and shape lesser swing highs because price rises.
Let’s look for illustration. Here we now have a 30-minute graph on the EURJPY money set. Our fashion analysis has to start at the far left of the chart by simply signaling the greatest high. My recommendation would be always to add in the least trading days’ worth of price bars on your chart. Today’s analysis pinpoints the April 25th high located at 107.67. From this point, the EURJPY moved 220 pips lower to 105.47 creating a new swing low on April 30th. From this point, the chart has continued to print lower highs and lower lows all the way through today’s price action. This is indicating price is in a downtrend.
Now that we have an idea of where the trend is going, we can also use our analysis to gauge market momentum. For this, I recommend blocking off our graphs into three day trading periods. This is done by using the verticle line function inside of marketscope 2.0 . Then proceed to block your graph by drawing lines denoting Monday and Wednesdays. You can find this process outlined below on our EURJPY graph.
Strong momentum is judged if we have the last two blocks coming to the same conclusion regarding the trend. The blocks denoted in green both conclusively show lower highs and lower lows during their respective periods. With this in mind, as a trader, I will have a stong bias to sell.This process will continue into next week as well. At the start of trading on Monday, I will draw a new verticle line on my graph denoting the weakness of the EURJPY from Wednesday the 2nd through Monday the 7th.
Using the analysis above, my preference is to continue to find opportunities to sell the EURJPY on retracements and breakouts. This is preference is in tune with our trend and will continue to be the basis for our trading unless price prints a higher high. Primary price targets for this pair reside at 104.16 as discussed in the April 11th edition of Chart Of The Day.
–Written by Walker England, Trading Instructor
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