Many new traders wonder what are the best methods to determine the start of a trend and also how to know if a trend may be ending.
How good will it be to know exactly when a new trend is starting which means the previous trend is ending?
It would be good to know for sure but what are the benefits of doing that?
Well? I got two main benefits of doing that:
- you’d be able to get into a trade at the very start of a new trend
- which means you can let your profits run from the very beginning of a trend instead of the middle of a trend which means more profit.
So what are the best ways to find out if a new trend is starting?
In here, I will show you the 3 simple ways you can use to determine the end of a trend and the start of a new trend.
#1: Moving Averages
This is the most common and obvious choice for many traders.
- If price price crosses a moving average and travels above it, there’s a chance that now an uptrend has just started.
- If price crosses a moving average indicator and goes below it, it can be taken as the start of a downtrend.
- one of the most common ways is to combine two moving averages, for example, the 9 ema and the 18 ema and whatever direction the faster moving average (in this case, the 9ema) crosses the slower moving average, that is taken as a confirmation that a new trend is in progress.
Or use moving average crossover to indicate the start of a new trend:
#2: Support and Resistance level breaks
This is a really solid way to to determine the end/start of a trend.
- In an uptrend, price will be making higher highs and higher low. If a higher low is intersected and price closes below it, this signals that the uptrend has ended and downtrend may be starting.
- In a downtrend, price will be making lower highs and lower lows. If a lower high get intersected and price closes above it, this may be the start of an uptrend market (which means the end of the downtrend).
#3: Trendline Breakout
One of the best ways to determine the end of a trend is to use a trendline…more specifically, the breakout of the trendlines.
- If you draw a falling trendline in a downtrend and if price breaks it and closes above it, you should take notice because this means that the downtrend is most likely ending.
- Similarly, if you draw a rising trendline in an uptrend market and if price breaks that trendline and closes below it, then it is one of the most reliable signals telling you that the uptrend is most likely ending.
Other Trend Identification Methods
Other methods can also be explored, like:
- parabolic sar…if dots form below the price, market is deemed to be in an uptrend. If dots above the price, market is deemed to be in a downtrend.
- macd is also used as a trend indicator.
Before you leave, just note that the following subjects may also interest you:
- my free forex trading signals based on price action trading may interest you, remember to bookmark that page if you like what you see.
- read the ultimate guide to order flow trading.
- or read my free price action trading course
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