Does anyone know how to correctly detect the end of a trend? How do you know when the trend is changing its direction at the end of the current channel? e.g We have a descending channel. At some point, a breakout happens and the channel starts to ascend.
Helloooo @campione! Haha. Cute gif. I’m not sure if this will help but as for the system I’m using, I use RSI and ADX to help me confirm the strength of trends and if they’re about to head to the other direction. Haha.
It’s my pleasure you liked it Shall we mix RSI and ADX in one indicator window? what period for each? Which Timeframe shall I look for heading to other direction? 30M/1H/4H/1D? Also ADX has few variation, which variation of ADX do you suggest?
Best way for me is recognizing when the momentum is gone (I use CCI) usually the caldeles will shortly follow and change directions. Other indications are the candles themselves, getting progressively smaller, wicks painting opposite the trend, putting up a trend line and it is hit, using percent of deviation and (bollinger Bands) and the price action moves away from the outer signal line. Certain patterns like a two or maoi=inly three bar reversal, Apex bars, indecision dojis, hangman and grave stone to name the more higher percentage ones.
There isn’t a definitive way to know if a trend that is weakening or slowing is going to fail or reverse or become a range or resume the trend direction.
The reason is because TA cannot predict the future. It is not a great guide to what is going to happen but you can use it as a brilliant guide to what you should do.
Make a note of the characteristics that appear across every trend that you get into, you have to know what a good trend looks like before you can identify when it is failing. Then watch in case these characteristics start to disappear one by one. Use different time-frames, different chart types, MA’s, price action to give you clues. When you have seen any or enough of the good features cancelled, get out of the trade.
There is almost nothing lost getting out of a trade too early. If the trend resumes, you can get back in and this time you might be entering a better pattern at a better price. But if you’re too late getting out, its game over.
Pay attention to the strong countertrend movement with the consolidation above it plus search for the confirmation with volume. The highest daily volume usually took place near the high/low of the day.
The reversal could look like that:
enormously fast movement towards important level
strong pullback
consolidation in the upper range (at the pullback level)
At the end of each day, as I only use daily and weekly charts to identify the features I like to see in a strong trend. But you could develop your own characteristic features and these could come from intra-day or live charts. The good trend features you personally use should be in line with your strategy.
I do give some features a bonus point because they are more important than others. But you can identify your own list according to your strategy, and then the strategy will also inform how many points you should allocate to each feature when seen.
Another approach is to have mandatory features - so currently in order to take a long trade I always have to see my main 3 features in place before even considering a trade.
Its worth playing around with these things in demo but start with the strategy first, the rules of the strategy will tell you what chart characteristics you should look for.
Actually, those indicators are really from the system I’m currently following. I’m looking at the 1h time frame and the daily every now and then. Haha. Do you have any system in mind right now?
thnx. I will PM you a system that I can suggest. But its depends on how you run the strategy, and always run in demo before trying it on live account, market is cruel they don’t care if its all your saving or not, they take it all if you are not sharp enough.
Personally, I like the BLT and even club sandwiches.
Try looking for the Hangman or Gravestone both very high probability candles.
It’s in the road signs.
I also think the three bar reversal is by far the strongest pattern indicator of a reversal along with being the easiest to identify that happens all the time no matter the time frame.
You can never know for sure when the trend is ending.You simply can’t. You just need to setup your profit taking rules in a way that you’re comfortable with in order to capture as much of a move as possible. Remember though, you can’t have the best of both worlds.