As you are reading this, you clearly might be aware that forex trading is one of the biggest trading markets in the entire world. Also, every trader wants to know how to identify the trends and determine the relative strength of such trades. The appropriate knowledge of trends allows the traders to trade with the momentum rather than against it. Adopting such strategies will, in turn, increase the odds of the favourable outcomes for your trade.
As the grasping and understating the trends is highly beneficial, it is not easy to hang it without the appropriate knowledge of the trends. Also, it is not a straightforward task of gauging the strength of such movements.
In other words, the plethora of indicators and techniques have flooded the financial world over the years, and these have unnecessarily convoluted a relatively simple task.
SO what do you think is easy to trade with the trends? Well, it depends on the techniques and tools that you use. You can learn about more techniques at forex.com review.
3 Powerful techniques to determine forex trend strength in 2021
There are very simple and only three core techniques that we will explain to you in this post. Eventually, you can learn how to trade with trends smartly and efficiently with the help of this. Also, these techniques will help you determine the trend strength much more manageable tasks.
Let’s get started.
CHARACTERISTICS OF THE TRENDING MARKET
First things first. We need to learn how to identify a trending market. Usually, traders find it very difficult in determining that. But honestly, it is straightforward. A trending market is the one that makes higher highs which are eventually followed by lower lows followed by lower highs. But before you start trading, it is essential to understand the facts and have complete knowledge about higher lows and higher highs. You can learn about all these concepts in a detailed manner at forex.com.
Now, comes the part where we need to make this basic concept of highs and lows into actionable form.
- The highs and lows tells the entire story
We will start by analysing where the highs and lows have been formed over the period. In simple words, we will understand the relationship between highs and lows as they develop over time. With this technique, we observe where the extended swing highs and lows are within a given trend. Therefore, always keep in mind that trend changes. You have to look a bit harder to find them in some instances. We need the highs and lows to interact with a critical level in a way that offers a favourable setup.
- Distance Between subsequent Retests: A killer way to determine trend strength
Now, you have a clear idea about using swing highs and lows to gauge the power of a trend. Now we will add a fundamental level to the mix. There is a very irrelevant misconception among the traders in all markets where they consider only the traditional trading method. But according to the latest notion, multiple tests of the same level make the level more visible as they do not make it stronger.
- Clustering price action: An early warning sign
Well, coming towards the last technique is when price action clusters near a critical level. In some ways, this is just the combination of the two methods mentioned below. Often this technique is called heavy price action. As the term implies, this is usually when the market begins to put constant pressure on a critical level over a short period. At any rate, the main idea and essential element here is to watch how the market responds to support or resistance within a given period. A typical period would be a few days or maybe a full week of trading from the daily time frame. Learn more about the clustering price action at forex.com.
So, if the market begins to cluster or group for an extended period at a critical level, the chances are that the trend is about to break down and reverse.
- Also, there are three different types of trends named as long term secular trend, which usually lasts for five years or longer.
- An intermediate trend which lasts for one year or longer.
- A short term trend is the one that lasts for a few weeks to a few months.
Final words:
So, determining the trend’s strength doesn’t need to be a complex operation with these three simple techniques. You can understand whether the trend is going to continue or breakdown. Therefore, any trader can do the best thing for themselves, whether they are attempting to decipher trend strength or identify key levels is to get back to the basics. The basic will help In clearing the doubts at every step.
