Lately, I released an article on trading with Trend Level Signals alongside RSI and support/resistance level. And then I got a question from my readers “How do I spot a trend?”
This is actually a very good question. For those who have been trading for many years, the answer will be very simple. They will look at the chart and know. But for those at the beginning of the commercial adventure, it can be more difficult.
I decided to address the needs of my readers and write this specific article on identifying trends.
The relativity of the trend
The simplest way to describe a trend is to say that an uptrend is when prices hold higher highs and higher lows. The downtrend is formed by lower highs and lower lows.
However, trends are not uniform. Pricing consolidation periods occur quite frequently. During this time, you will find lower highs and lower lows in the uptrend and the opposite in the downtrend.
The price will fluctuate between so-called support and resistance levels.
The other thing is that the ease of recognizing the trend depends on the candle time frame you choose. Everything looks a little different when you look at the 5-minute or 10-minute interval candlestick charts. There are two charts below that I want you to look at.
You can clearly see that reading the chart with a higher range is just simpler. The trend is better to identify, the areas of price consolidation are narrower. You may also notice that the price is approaching the trendline after consolidation.
2 Trading Methods Using Trend in Quotex
The first thing is to know how to identify the trend. Once you've become familiar with it, it's time to use it to find a good trading opportunity. Here I will share some tips with you. Please remember to always trade along with the trend.
Trade with breakouts
In the downtrend below, support lines are drawn. You can see sometimes the price hits them. But its entry point is when the first bearish candle breaks the support level.
Trade when the price recovers
There is again a downtrend in the exemplary chart below. There is a trend line and a resistance line drawn. When the price reaches the intersection point, it immediately drops further. This is confirmation that the price will continue to drop and a great time to make a sell transaction.
A few more examples. Look at the graphic below.
Number 1. At this point, it's a newly developed trend. After breaking the resistance line, the price goes back to the previous level, which can now act as support. After the first bullish candle, we have here a good bullish pinbar test support level and trendline at the same time. This is a wonderful set to go for a long time.
At point number 2, the bullish candle touches the trendline, giving a signal that the strong uptrend will continue. And again it touches the support level. A good time to enter a buy position.
Identifying trends is a bit of art mixed with science. I recommend using longer candlestick ranges and also longer charts, from 3 hours to 1 day. Thus, it will be easier to distinguish a trend.
To draw a trendline, join the high-lows in case of an uptrend and the low-highs whenever you notice a downtrend.
The next step is to identify the support/resistance level and watch the price. When you break one of the levels, you can anticipate that the trend will continue in the same direction. That's why you should enter a position at this time, as per the course of the trend.
Check out our guide on the Trend Level Signal strategy to deepen your understanding of trend trading.
I hope I have now answered my readers' question about how to identify the trend in Quotex. By all means, but knowledge into practice. However, always be careful with the risk. No strategy is completely risk-free, and you should only use any of them after careful consideration and practice.
Tell us how it went. Use the comments section below.