The analysis of Trends and their Importance
I had a chance to interview a colleague the other day, and he wants to remain anonymous because of consulting obligations but he shared with me some fundamentals that I will briefly summarize. Apologies in advance if some of this is too technical for novice traders.
A trend is a duration of the price with a maximum and minimum of time. This is your technical basis of your way of working and by which you are guided to enter into an trade.
We are in an uptrend when the highs and lows are upside. On the contrary, we are in a downtrend when the highs and lows are decreasing. According to duration and trend there are 6 types of trends: primary, secondary, tertiary, fourth, fifth and sixth.
The primary is more than a year but sometimes it can last longer. The secondary two months and less than a year. To better understand them, look at the following graph about Amazon:
With this chart we observed several primary bullish and bearish. To know when it changes from primary to bullish , there are two important things that give us the trend change and this is the guideline. When the guideline is broken, this is already a trend change and goes to primary bearish.
If we look at the first part of the graph we see that in the primary there is a double secondary ceiling, the breakage of the guideline, and there is definitely a bearish trend.
The tertiary trend is more than a week and less than a month, the fourth is more than a day and less than a week.
We can see between the graphs the upward and downward trends of both the tertiary and the fourth. Between the fourth bullish and the fourth bearish there is a double floor, at the beginning of this new trend and break the maximum of the previous fourth bullish past to tertiary bullish. The quarters give way to the tertiary and are bullish when they break the roofs of the bullish quarters.
The fifth is over two hours and less than a day, the sixth is over fifteen minutes and less than an hour.
Remember that every change of trend has a temporal space of time, if we follow the times we can know where we are, how to work and when to enter but has some pitfalls. The following chart shows Thursdays and Fridays. A bullish trend is produced by bullish highs and lows, as well as rising highs and decreasing lows.
He is a very successful trader and he also explained the currency pairs he has worked with in forex trading: