4 Ways To Determine The Start Of A Trend

Posted on

Determining the start of a new trend is not something you can truly do. Only when the trend has actually started in a new direction can you say “look, a new trend”.

You must also add to that what – what trend are you talking about? There is not only one trend as the time frame you are trading can have a different trend than one on a lower or higher chart.

What about knowing when a trend is ending?

While that would be an excellent way to virtually print money as you get on right at the beginning and ride until it ends, you will never really “know” until the direction of the market has changed.

What we can look for his a higher probability of X happening over Y.

For example, if the chart you are trading is in an uptrend direction, can we see something on the chart that may show the market has a high probability of reversing?

Yes.

Is it also possible that the reversal is setting up a change in trend?

Yes, that is also possible. You would not know at that point though that a trend change is underway.

Let’s look at 4 ways you can be “on alert” for a change of market direction and perhaps even the start of a new trend.

Moving averages are the most common and obvious choice for many traders as virtually every charting platform has them.

Here is a quick rundown on how to use the moving average to alert you to the “potential” start of a brand new trend direction.

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.

using moving averages to determine the start of a trend in forex

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 9 EMA) crosses the slower moving average, that is taken as a confirmation that a new trend is in progress.

using moving averages crossovers to determine the start of a forex trend

Always remember the technical indicators lag price. Moving averages can give you, at a quick glance, the state of the last X number of candlesticks averaged out. For example, a 20 period moving average will average out, usually the closing prices, of the last 20 periods.

Depending on the length of the moving averages you are using, you will be late to any trend change so at best, you will get into a new trend not at the beginning, but close to.

All you are seeing with a moving average is the increase or decrease in the average price which can change for a variety of reasons. Still, moving averages, especially the direction of the 200 period moving average, are popular indicators to use to show a change in the trend.

Leave a Reply

Your email address will not be published. Required fields are marked *