As the saying goes" the trend is your friend" but how do you go about finding the trend? If you need help identifying a trend, then you are in the right place!
First off when we say "trend" what are we referring to? When we say trend we are looking at a certain instruments current direction and looking at jumping in at an advantageous price.
For example, we have all heard someone say" I want to get long this bullish trend", that means that a trader is looking at buying a certain instrument or contract in hopes of getting into a bullish trend with hopes of the asset price increasing in value. A bullish trend is one that is current moving up, a bearish trend is one that is moving down.
The opposite is true when you hear someone say " I want to get short this bearish trend", that means the trader is looking at getting into a downwards trend in hope of price decreasing in value.
Now that we got the basics out of the way how do we find the trend?
The best way to do this is to use price action and market structure, we have tons and tons of blogs that go over these two subjects and a MASSIVE Price Action Course as well. But today we are going to focus on finding the trend, we do that by looking for higher highs and higher lows in a bullish trend and lower lows and lower highs in a bearish trend.
In a bullish trend we want to see price "stair step up" at the top of the step is a higher high and at the bottom is a higher low. We would ideally like to get in at a higher low due to the fact price could be considered "cheap" this is also referred to as a pull back.
Lets take a look at an example.
Above we can see one of the pictures from our Price Action Course. The HH's mean higher highs and the HL's mean Higher Low's.
Once traders are able to identify the trend they can then focus on going with the current trend and the best way to do this is to label the Higher Highs and Higher Lows, once labeled then traders will need to look for a long signal similar to the ones labeled above.
Lets take a look at a bearish example.
Above we can see one of the pictures from our Price Action Course. The LL's mean Lower Lows and the LH's mean Lower Highs.
In a bearish trend instead of looking to sell the lower step, traders will look to sell the Lower High as this would be a more advantageous price if your expecting price to continue moving down. ( buy low sell high).
When looking at getting into a trade, traders will need to first identify the trend and the best way to do this is to simply label the HH/HL's & LL/LH's. Once you know the trend, simply use one of our go to entry signals to get long or short.
Remember when looking for a trend if you can't determine which way price is moving then it is always wise to sit out and wait for the trend to show it self.