Trend Analysis [Advanced]
This tool is for traders that want to plan their trades and want to have a good understanding of the current market structure.
Plan your Trades
This tool is for traders that want to plan their trades and want to have a good understanding of the current market structure. The indicator is not intended to be an entry/exit indicator rather it's a tool that supports you in your daily market analysis.
The indicator gives two types our insights.
1) Identifies the end of established trends
2) Identifies pullbacks/retracements within trends.
The dilemma
The indicator cannot differentiate between if it's the end of a trend or if it's a pullback since the market characteristic is so similar in these phases. We as a trader has to make the final judgment.
Examples
Example - Positive Trend
This graph depicts when the indicator has identified a pullback within a positive trend. (This was a trade I took in EURUSD 1 hour chart, I bought that pullback)
The graph below depicts when the indicator has identified the end of the positive trend. Hence we do not want to buy at this point and rather we should start to plan for short trades.
Example - Negative Trend
This graph depicts when the indicator has identified a pullback within a negative trend.
The graph below depicts when the indicator has identified the end of the negative trend. Hence we do not want to short at this point and rather we should start to plan for long trades.
How can I make use of these insights?
We can clearly see that the indicator identifies 2 possible outcomes, the end of a trend or a pullback within a trend. So how can we as traders differentiate between these?
We combine the indicator with simple traditional trend analysis methods, such as Trend Lines. We can look for Higher Highs, Lower Lows, Higher Lows, Lower Highs to understand in which trend the market is in. There are many ways to do trend analysis and this indicator should complement that analysis!
Make scenarios
Use the indicator to plan for future trades, use the insights about the current trend structure to make scenarios of how the market may play out from the point a histogram is plotted.
Make 1 scenario based on that the histogram has identified a pullback within a trend and make 1 scenario based on that the histogram has identified the end of a trend.
Be proactive and plan for possible scenarios can make a huge difference in your success as a trader. This indicator can help you along the way.
Trade Examples
Apple 1 hour chart.
How can the indicator help us in this situation?
1) We know that the red histogram can either be a sign of a pullback within a negative trend or be a sign that the negative trend is over. (we will turn bullish).
In this case, the price is making lower lows and lower highs, the price has violated previous support at 144 and made a new lower low around 140 (long-term support level).
Scenario 1
The negative trend continues.
Scenario 2
The negative trend ends and the market turns bullish.
More Information
How to identify the Start/End of a confirmed trend
This is not an indicator that is used to find entries/exits. This indicator does only tells us when a confirmed trend ends and starts!
This indicator is for advanced traders that have a good understanding of Trend Analysis and Market Structure. This indicator should be used with Trend Analysis! Use Trend Lines, Trend Channels, Market structure, etc in combination with the indicator.
Example of how to use the indicator
Last updated
