Technical Analysis Training – Part 2 Will The Trend Stop or Will it Continue
In the first part of the technical analysis training series on Will the trend stop or continue we discussed how measuring the strength of a trend requires two types of tools , while helps you decide whether a trend is going to continue or stop. Tool number one was setting targets properly according to support and resistance’s structure .
Momentum tools are the second type of tool needed . These tools should be used to make appropriate judgements and apply them to a smaller timeframe than the one you’re trading … basically if you’re trading on a daily chart, trying to pick the low or high of the day with the trades , then you would be looking at an hourly or half-hour chart to give you support in your trading decisions intraday .
What are these types of tools ? A short-term moving average is one of the best ; three moving averages should be used within a channel system and you’ll have a matrix created, which you can use to measure the strength of the trend against . Various channel systems exist but one of the best is the Drummond Geometry system (you should have learned this in your technical analysis training course) which as the center line uses a moving average that is short term of the average of the high, low, and close of the last three completed bars , projected forward onto the future bar . Then two channel bands are added to this based on averages of the past 3 pivot points that are similarly managed. Judgments that are very effective of the strenght of the market can be made by looking in relationship to this channel system at where sequential closes occur.
You should also establish market "flow" by measuring using various aspects of price strength , including how close to the low or high the bar close is , how far apart the open and close are , how small or large the bar range is, and the progress that the bar is making through the matrix of resistance and support you have.
Another tip : Because each time-frame has its own system of support and resistance , watch how easily or with how much difficulty in a trend the lowest timeframe monitor breaks its own support or resistance. If this happens easily, the more the underlying trend is probably going to be robust. In an uptrend , support close to the low of the bar is going to hold , and resistance nearby is more likely to break easily. Resistance breaking and support holding in a lower time period- this is a very reliable sign of the strength of a trend .
With these tips, your stock trading strategy should become a winner consistently as you learn how to know when trends are running out of stream and those that may go on for days, weeks, or months . A course that helps you sharpen your technical analysis training can save you a lot of time and money by giving you the right tools to make the distinctions that are so important.