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Thursday, 18 October 2018

Practical Ways to Distinguish Market Trends and Sideways

It is very important for traders to understand how to differentiate a trendy market with sideways. Why is it important?

Because knowing this, traders can determine which approach to take for the market.

"The practical way to determine whether a market is trending or not is to just look at the market price action, through a graphical display," said trading expert Wahyu U.K. Notodiputro commonly called U.K. (read: Yuuke).



Look for Patterns

To look for trend patterns, we usually see repetition patterns, for example, High Higher (HH) and Higher Low (HL) in the rising market.

In a declining market the pattern formed is usually Lower High (LH) and Lower Low (LL).

The following is an example of a clear market that tends to be higher as evidenced by the recurring pattern of High Higher (HH) and Higher Low (HL).



How do we know when a new trend has begun or the old one has ended?

In a forum discussion, U.K. explain using price action analysis techniques we will find out. Look at the pattern, namely High Higher (HH) and Higher Low (HL) or Low High (LH) and Lower Low (LL). For example, after you see the pattern of High Higher (HH) and Higher Low (HL) being interrupted or damaged with prices that make Lower High (LH), this is an early warning that the rising trend may end.

To really consider that the uptrend has ended and a new downtrend has begun, we need to see at least one LH and LL pattern. That means, once the price makes the Lower High (LH) first, so it fails to make Higher High (HH), we then need to see it make Lower Low (LL) follow Lower High (LH). At this point, we can start looking for the right time to enter the market to become a seller.

Moving Averages

The next method we can use to differentiate trends and sideways markets is to use moving averages indicators.

Moving averages provide easier visual guidance for beginners, but must be used in combination with the price action strategy discussed above.

Basically there are two things to look for when using moving averages to distinguish trends and sideways markets. One, when the direction of the line intersects as shown below is shown by the red arrow. We can only use a 'crossover' to determine the direction in the traditional moving averages crossover transfer system.

The second thing to look for is if the moving average lines are diverged (away) from each other, as in the figure shown by the blue arrow, because this shows a very strong market. However, you need to combine with a price action technique from one point, as a filter, because moving averages will sometimes fool you if the market is limited. They really are only used as a quick reference to know the direction of the trend, look at the area of ​​value, look for the right time to buy and sell.


Parallel Level

We can also use the main support and resistance points to determine whether the market is trending or not. The basic approach is just looking for prices that clearly oscillate between parallel levels. If you bounce between two parallel levels, then you have a market that is bound to boundaries or sides, not a trendy market. There are two basic types of sideways markets, when the market looks choppy and has limited range.

Now, after we know three ways to distinguish trend and sideways markets, it will be easier to determine the exact moment to enter the market. And these three methods are only part of many ways to find out market conditions. If you want to learn more and more clearly, please join the wormtraders.com forum. It's easy and free, just click on the JOIN NOW banner in this article, follow the steps to complete.

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