Hello traders! I’m sure all of you by now have heard the old trading phrase, “The trend is your friend,” or even the long version, “The trend is your friend until the bend at the end.” The implication of this timeless phrase is that we should be going long in uptrends and short in downtrends – making our trading job easier. Easier how? Generally speaking, when you trade with the trend of your chosen style/time frame, you will make money more often (have a higher win-loss ratio), your winning trades will be larger and your losing trades will be smaller. Sounds pretty good, right?
Obviously, the long version of this trading phrase gives us a clue that trends don’t last forever. Wouldn’t it be great if they did? No, of course not! If trading were really easy, there wouldn’t be any money in it! So it is actually a GOOD thing that trends pause and /or change direction. So our next bit of chart analysis will help us determine if a potential change in trend is coming.
On the following chart I’ve drawn in two trendlines, indicating the origin of the move to the upside on this 240 minute EURUSD chart. The way I look at this chart, it took some huge money to stop the trend from going down and reverse its direction. Who has that kind of money? Certainly not me, and I would imagine… Continue Reading
