In part 10 I wanted to reflect back in a similar way on what we went over and learned in Part 3 of the series about trends. This is a very important aspect of understanding the Forex Market and so I feel going over it again is a must do. In this instance we focus and look at trending markets like waves. This is a different way of looking at it and can help train the eye when these aspects are seen in the market in future.
Also, if you are like many other traders trends can literally appear invisible. This is because an aspect of the mind needs to be trained on what they are seeing when they look at the market.
In a way it is a bit like one of those 3D images. To some people they try and try and the mind finds it difficult to see the 3D image, however with patience and discipline the 3D image can come into view within a few seconds. All it takes is time, discipline and waiting for the mind to see what was once hidden from view. In that sense, one could also see it like a jigsaw puzzle. Each missing piece being put back together.
Above Image– Do you see the Shark?
Image Source: Fred Hsu, March 2005 Wikipedia
The good news in all these factors, like anything in life, it can be trained and learned like any other skill.
I like the analogy or simile of looking at the market a bit like a wave as well, or even a river ripple. Constantly waving even in ranging markets. Timing the tops of the waves for selling in a downtrend and timing the bottoms of the next wave of buying in a uptrend. In a ranging market of course this can be where things can be a bit more difficult and that is why we use stop losses as well for when we are wrong.
Above – Me at Gold Coast Beach Australia enjoying the view of the waves.
Trend Trading Tip with Stop Losses
It is important as well to place the stop loss below previous low in uptrend and above previous high in downtrend. The reason being is that is most likely where one would be wrong on a move, also it is where the market needs to go in order for a valid trend change. Because of these two reasons, this is a good tip. One can however if using good price action use a good price action candle stop, while this may increase losses, it also reduces risk and load on a trader when right on a good price action move.
So both methods in a trending environment are effective and have there positives and negatives.