Dear all,
When trading price action, do you always follow the overall trend or you also trade price action patterns against the trend? How do you define the overall trend? I like to take a look at a higher timeframe first, check the trend on it and then switch to my timeframe to search for candlestick patterns…
This is a good question, but maybe there’s more to the answer than you realise.
Firstly, trading is an activity, not a science. So, you will be misleading yourself if you look at a chart and say, “Does this chart have a trend?”
The object of TA is to find a trend you can use to trade, not to find the trend. Charts are not like finger-prints or DNA or a photograph of what actually is. They are guides to what you could do about what has been.
So, decide in advance what features a trend you can use must have and find a chart which has those features. Then use the chart to guide your trade.
I have spent a lot of time looking for charts with the best trends in my time-frame. But now I look for trend start or continuation signals in my time-frame and take those trades, with the trend the signal says is in place. I then run the winners and cut the losers. If the trend on a winner weakens, I cut it. If a winner runs very well, I pyramid it. So far so good.
So, your answer is “I only trade with the trend”, right?
Yes and no. I only trade with a strong trend in my time-frame which gives a meaningful entry signal - BUT, there could be more than one trend even in the same time-frame. So trade with “A” trend is a more accurate picture.
What I never do is open a position in the hope of a trend starting, nor bracket trade using a buy order and a sell order and hoping one or other will be triggered and will become a trend.
Whatever trading strategy you are using, you have to clear first the trend of market! Yes I always follow the market trend! For me, support/resistant levels help me a lot in this case!
For Price Action trading, D1 time frame is the best one for determining the market trend! Market doesn’t respect intraday levels as like D1.
I personally have a very good experience with 200 MA and daily time frame. If the price is above the MA, I consider this an uptrend and I take only long trades on 4hr charts. Maybe some of you will disagree but it works quite well.
You are trading with a long term mentality, that’s way, you can rely on M200 but, for the intraday trader’s only M200 is not enough.
You’re using it as what’s called a “directional bias indication”.
It’s a perfectly valid and reasonable one, whether people disagree with it or not.
It will work much better, however, if you use it to define “uptrend” only when the price is above a rising MA and to define downtrend only when it’s below a falling MA.
So what if on H4 the price is under 200MA and showing down trend and you still long in this case ??