Part 2 Technical Analaysis Training - Will the Trend Continue or Stop?
In Part I of our technical analysis training series on Will the trend continue or stop we talked about the need for two kinds of tools to measure the strength of a trend , which will help you assess if the trend will continue or if it will stop . The first tool was the proper setting of targets according to the higher time period market structure of support and resistance .
The second tool to use is momentum tools. To make appropriate judgments you should use momentum tools and apply these tools to a timeframe that is smaller than that of which you are trading... in other words if you're trading on a daily chart, trying to pick either the low of the day or the high when trading, then for support for the intraday trading decisions you'd be looking at half hour or hourly charts .
What are momentum tools ? A moving average in the short term is a great one; use three moving averages in a channel system and you will have created a matrix against which you can measure the strength and robustness of a trend . There are many channel systems but one of the most effective is the Drummond Geometry system ( more than likely you learned about this in a technical analysis training course) which uses a short term moving average as its center line of the average of the close, high, and low of the last bars that have been completed , projected to a future bar. Then two channel bands are added to this based upon averages that are similarly managed on the previous three pivot points . Judgments that are very effective of the strenght of the market can be made by monitoring where sequential closes occur in relationship to this channel system .
You should also establish market "flow" by taking measurements using different price strength aspects, such as how close the close of the bar is to the low or high, the distance between close and open , the measurement of the range of the bar , and the amount of progress the bar makes through the matrix of support and resistance .
Another tip : Since every time frame has a support and resistance system , watch how difficult or how easily the lowest monitored timeframe breaks support or resistance in a trend . The more easily this occurs , the more robust the underlying trend is likely to be . In an uptrend , support close to the low of the bar is going to hold , and resistance nearby is more likely to break easily. Low time period resistance breaking and support holding - this is a very reliable sign of the strength of a trend .
With these tips, your stock trading strategy should become a winner consistently as you learn how to distinguish between trends that are running out of steam and trends that can continue for many days or weeks or even months . A quality course on technical analysis training can save both time and money for you by giving you the right tools to make the distinctions that are so important.
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