When is the Market Really Trending?

How to Determine When the Market is Really Trending

One of the most important things you are probably trying to figure out with any given market is if it is in a trend, and in which direction that trend is moving.

Find the trend and make friends with it.

Swimming upstream is difficult, and that kind of battle is probably why you’ll often hear traders say, “The trend is your friend.” But spotting a real trend can be tricky, especially for first time traders and chart observerers.

Guess who bought the dip? That’s right, the floor traders and the other professionals.

If a market is really trending, there will always be reactions against the prevailing trend. Those are the signals most floor traders love. They know that many investors in the general public will fall for the “fade” nearly every time. So how do you know whether or not what you are seeing is a real trending market or not? The basics are very simple. A market in an uptrend will likely have higher highs and higher lows. The opposite is true for a downtrend. Lower highs and lower lows tell you when the market is in a downtrend. You never want to go against these situations.

IMPORTANT TRADING RULES:

1) We never get long or buy in a downtrending market.
2) We never sell or go short in an uptrending market.

…..To do so would be just like stepping in front of a freight train. .

A market on a move higher will attract new buyers and selling forces will help establish higher highs. When the price dips, more buyers will come in on what they perceive as a value entry point, delivering those higher lows. On the downside, selling pressure will cause lower lows and any move above those results in more sales, topping off those lower highs.

Find support and resistance and find trading opportunities.

Once you have determined the overall trend, you can look for support and resistance points. Knowing these price levels can help you follow the trend, buying on dips in a market that might be trending higher or selling on pops when the prevailing trend is likely lower. It doesn’t get any better than that!

Comments

  1. BMardiyya Williams says:

    Be sure to Watch for the “M” & “W” s….. How often repeated
    What’s your medium to take action to buy or sell considering your intention…to profit!

Speak Your Mind

*