Trend Interpretation - Am I on the right path?

Hey guys. I’m busy working through the Course material on this site (which is awesome BTW). I’m planning on swing trading, and during the demo practice I’ll be focusing mainly on EURUSD and GBPUSD. Because I can basically only check the charts once a day, I’ve decided to use the weekly charts to determine the overall trend, and the daily chart to time entries and exists (I’m hoping my logic is sound regarding which time frames I’m using based on how often I can check the charts).

What I’d like some input on, is whether or not I have interpreted the trend on this chart correctly (looking at it from a swing-trading perspective specifically)? As far as I could tell:

  1. From around 2015-02 the trend started moving sideways.
  2. From 2017-07-09 the trend broke upward quote strongly.
  3. From 2017-09-24 the trend broke the support, and although there were higher lows, there weren’t really higher highs, which means this isn’t a true up trend.

Am I on the right track? Did I interpret this correctly based on my chosen style of trading? Am I zooming out too far to determine the overall trend, since a swing trader typically would keep a trade between 1 and 30 days roughly? If I am zooming out too far, should I perhaps only be zooming out to a month or two back to determine the overall trend?

I don’t trade this timescale, but your thoughts on the pair are very interesting. I primarily disagree with the line you drew as the bottom of the pennant, which seems a little bit of wishful thinking.

The question here is whether the price is going to breach the resistance level established at ‘3’, and recently tested at the end of the year, or whether the price is going to enter another period of ranging, meaning it will swing down to something in the region of recent lows.

If I were trading this I’d probably place a pending order somewhere above the resistance level, so that if price does break through I capture the movement, but without having to commit until the price has actually given a reason to. I might also place a pending order below the price to try and capture a ranging move, but that will be riskier since the true support level has not really been established yet.

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Thanks Drekieyja, appreciate your thoughts! :slight_smile: To be honest, I am not even thinking about trading at this moment (demo or live), but merely trying to determine whether or not I am interpreting the trends correctly. The way I learn best is to focus on a stand-alone “skill” by itself, trying to make sure I have that skill down before I move on. In this case, the skill I am focusing on is reading the trend out of the viewpoint of my chosen trade style. Hope that makes sense…

It make sense, but I think you are wrong, for two reasons.

First, and most simply, placing trades (demo or otherwise) and seeing the results is the ultimate test of your understanding, and provides feedback that is far less easily ignored than simply glancing at a chart a week or two later to see if price did what you thought it would. Ignoring this feedback mechanism is going to hurt your learning curve. Every trade is a perfect reflection of your current stage of development as a trader.

Second, and most important, forex just doesn’t work like that. Forex is about playing a statistical edge over the course of many trades. Many profitable forex traders get it wrong more than half the time. I’ve had profitable months where only 40% of my trades worked out.

To use an analogy, you don’t need every stroke to be perfect in order to be a strong swimmer. And you are not going to become a better swimmer by standing on the shore guessing at what the weather will do. You need to actually get into the water.

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What you are saying makes sense. While I do tend to be a bit too careful, I should probably have qualified my statement a bit more :slight_smile: I’m still busy with the BabyPips education/course. I’m planning on demo trading once I’ve worked through the course, but most probably not during the course. While I’m busy with the course, I just want to make sure I have a firm grip on each subject, and in some, like the trend interpretation, I often have questions like the ones I posted (especially the one about how far I should be zooming out on the chart, etc).

Unless you have much more trading capital than most of the people on this site, you are on the wrong chart.

The W1 chart will give you only a handful of trading opportunities over the course of a year. This means you need large position sizes in order to make a decent profit. And because you are also dealing with larger movements, you need a larger stop loss, so your risk per trade is going to be much higher for the same profit.

Taken together, this means you need fairly deep pockets to make the W1 worthwhile.

Another issue, from a newbie’s point of view, is learning compression. The more you trade, the more you learn. The guy who makes for 4 trades per year is learning less, all other things being equal, than the guy who makes 4 trades per day. So although I don’t necessarily recommend going live on the shorter charts, there is a lot to be said for starting your demo trading on the M5 or the M15, where you have more opportunities to enter the market, and the feedback is almost immediate.


Cool, so, If I could realistically check the charts maybe 2-3 times per day (max, as I have a full time job, which I preferably don’t want to get fired from :wink:), which charts would you suggest I use? And would this make me a day-trader as opposed to a swing trader, which was the way I thought I would be going? (If we are talking about demo/practice trading now, not live trading)

As you say yourself, the final high fails lower than the high that preceded it, so doesn’t make a higher high. Personally I’d be looking to see what happens next - if your next few bars take out that preceding low then you might be looking at the start of a downtrend. But really your level (marked 3 on your chart) isn’t much of a level, with little really to support the case for it being a level the market would respect, so personally I wouldn’t be looking to trade this chart as it stands currently (not that I would directly trade the Weekly anyway, I just mean in terms of a PA formation I would be looking for a clearer chart before looking to trade it).


Thanks for the reply Simon! Agreed about trading on this chart, the purpose here was mainly to determine the overall/longer-term market trend that I am in, in order to know whether I would be looking at trading long or short on a shorter term chart.

If you want to trade around a full time job then a pretty low-impact (in terms of hours spent!) approach is End Of Day trading, looking for entries on the Daily chart. You can look at the Daily at the end of the day, so after you are home from work, when that day’s bar is almost formed, and look to place trades via orders. Those orders then either trigger or they don’t. If they do trigger then you manage the trade, and if they don’t trigger you can then cancel the order (assuming the underlying case for the trade has been invalidated by the failure to trigger). I’d look for supporting information from a couple of lower timeframe charts (and do look at the Weekly to give you a bit of overall context), but essentially you’d be trading the Daily, which gives you space to do a job. Sitting staring at the 5 minute does not, in my experience, really work around doing anything else.

But this is really a skinny version of the response, there’s a lot of detail needed in the ‘what kind of trader are you?’ area!


Awesome! This basically sums up what my thinking was in terms of trade style and which charts to use (Weekly for main trend, daily for entry/exit timing). Thanks! As soon as I’m done with the BP education, my plan was to take this approach with the Cowabunga system just to get a feel for the practical side of things.

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Between Brexit and Trump (not being political, simply referring to the indecision those two issues coinciding are capable of creating!) you might learn more from looking at a range of charts across a number of currency pairs, or even going back and looking at various charts from the past 5-10 years. You can learn a lot about what happened after various formations occurred and become really familiar with charts in general doing that. That’s how I started. For instance, there was a great, long term trend on USD-SGD a few years ago, and it gave a series of classic EOD setups for month after glorious month.

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You have a few different options.

Trading the H1, the H4 or the D1 will allow you to check in and set trades in the mornings and evenings. The slower the chart, the fewer trading opportunities, but the less hand-holding your trades require. Use set profit targets (which can be hit while you are busy with other things) so you don’t have to worry about constantly monitoring the price action to see when you need to close out your trade.

Alternatively, or in addition, if you find yourself with a block of time - lunch, after work, on the train, etc - trade the M1 or the M5. These trades require constant attention, but typically don’t last very long, so you can be in and out within a reasonable window.

Makes sense. Newbie question - would I use the same system (Cowabunga was my initial thought just to get my feet wet in the practical) for these shorter-term trades, the same as I would for the longer-term swing trades? In other words, same system, only shorter chart timeframes, and more frequent chart-checking?

Awesome, will do. Just to make sure I understand what you are saying from a newbie’s point of view - you are basically saying I should basically look at fundamentals and see how various world-happenings affected various charts and currency pairs up to 5-10 years in the past? Did I understand you correctly?

Charts are fractal, so systems scale up and down fairly well. However, spreads are not fractal, and nor are the non-profit-motive participants in the market. So as a general rule, all systems are less effective at lower time-frames. So don’t judge a system’s D1 performance on its M1 performance.

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Understood. Thanks for all the advice Drekieyja!

Sorry no, nothing so complicated. In my charting software, you can click and drag at the bottom of the screen and scroll back the charts to see the chart from years ago. It can be a useful exercise to do that for a few pairs on, say, the Daily chart, and see how Price behaved, how trends played out. If you want to be a trend-based trader, and particularly if you want to trade EOD, that can really do a lot to make you more comfortable with the charts and the various formations you will encounter. I spent a lot of time doing that and suddenly things started leaping out at me which previously I had missed. I didn’t try overlaying the fundamental picture of the day as that might have been too hard…!

Also, try the current Daily chart across a lot of Pairs (I have 22 or something in my watchlist). You will eventually get a feel for which look more tradeable and which you might want to steer clear of as they aren’t giving you anything clear.

Another useful exercise (and sorry am slipping into preachy mode so will stop!) is to try to make a case against setups. Too many people look for reasons (or just a reason) to be in a trade, but don’t look as hard for reasons to stay out of a chart.

Ah I see, thanks for the clarification. I’ll follow your advice, much appreciated! I think at this stage my brain is overloaded with info and I’m going into analysis paralysis mode! :laughing:

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You’re not the first and you won’t be the last!

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