Probably one of the hardest aspects of trading is working out the overall trend. It is easy to see it once it is really moving but trying to work out where it is starting to end and when it is officially starting is really the hard part.
As i have mentioned before one of the techniques i use is by using the h4 chart and then waiting for at least two lower lows then to be confirmed before i start to look to sell. The same goes for buying, I wait for two higher lows to confirm my bias as well.
Above – Example of How I Identify the Trend and Future Movements on a Pair. This is the AUD / USD 4 hour chart. Click for larger view.
This technique does have it’s flaws sometimes, as sometimes like we all know these two higher lows or lower lows could be the end of that official trend. That is why we must use our own judgement as well, when making the final assessment.
Anyways, there is another way of identifying the trend that i have not mentioned before but other good traders use. This is something one can use to help us a little bit more with the confirmation process of a change. What it involves is using multiple forms of moving averages. By doing so, we can at times see where major trends are changing when the candles or price might be showing us another story. This, i do not see so much like a indicator, i see it more like something i look at briefly each week or day to decide what bias i am on a particular pair. That way when i am ready for a good trade, i will focus my price action technique only on the trades that are going in the direction of that bias. Really simple really but mastering takes time so still always pay attention to price action overall.
Above – How to Identify the Trend with Moving Averages.
Remember identifying the overall main trend is part of the tools of trading, but like we all know trends can change. This just really improves our overall success. In the video above Kevin Barry from the Traders & Investors Club discusses exactly how to use the moving averages for this exact purpose.