Part 2 Best Online Trading – Will The Trend Continue Or Stop?
Posted on 17. Jun, 2010 by Global in Uncategorized
In Part I of our best online trading series on Will the trend stop or continue we discussed how measuring the strength of a trend requires two types of tools , which will help you figure out if a trend is going to stop or continue . The first on was setting targets the proper way according to support and resistance’s structure .
The second kind of tool would be momentum tools . You should use momentum tools to make the right judgements and apply these tools to a timeframe that is smaller than that of which you are trading… in other words if a daily chart is the way you’re trading , trying to pick of the high or low of the day with your trades , then you would look at half hour or hourly charts for trading day decision support intraday.
Momentum tools – what are they? A moving average in the short term is a great one; three moving averages should be used within a channel system and you’ll then have a matrix that you can use to measure a trend’s strength. Various channel systems exist but one of the best is the Drummond Geometry system (you should have learned this in your best online trading) which uses as its center line a short-term moving average of the average of the close, high, and low of the last bars that have been completed , projected onto a bar in the future . To this two channel bands are added based on similarly managed averages of the last three pivot points . Very effective judgments of market strength can be made by looking in relationship to this channel system at where sequential closes occur.
Market flow should be established by taking measurements using different price strength aspects, such as how close to the high or low the close of the bar is , the distance between close and open , how large or small the range of the bar is , and the progress that the bar is making through the matrix of resistance and support you have.
Another tip : Since there is a system or support and resistance for each time frame, watch how difficult or how easily in a trend the lowest timeframe monitor breaks its own support or resistance. The more easily this occurs , the more robust the underlying trend is likely to be . If there is an uptrend, support will hold if its close to the bar’s low, 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 .
Use these tips and you’ll see your strategies become winners on a regular basis as you are able to know the difference between trends that are waning and the trends that will go on for a long time. A good course that sharpens 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.
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