In this video we're going to take a look at trends types of trends trends are simply do you know.
Think of it much like trends in pop culture.
Things are tending to go in a specific direction.
So when somebody says that a market is in an uptrend as you would imagine it means that the market is
going up over time.
Pretty basic stuff trends though can also be downtrend.
So for example this area here on this weekly chart was most certainly in a downtrend.
As we were falling we fell from 138 U.S. dollars to 120 Canadian dollars by the time we got to the downside.
But since then we've been in an uptrend.
And that brings us to another possibility and that would be over here and what they call consolidation
just means the market is consolidating its gains or losses.
In this case the market had been rising for some time in an uptrend and then we consolidated a bit kind
of digested our gains pulled back a little bit further and then rallied to the upside.
Now the problem with trends is that people will use multiple time frames to define the trend because
you know why this is a weekly chart of the dollar cad and you can see that we were in an uptrend now.
We had pulled back a little bit here but on the weekly chart this is merely a correction.
I mean you can see that there is still an argument to be made for trend lines being part of the chart.
You know even with this pullback we've held that the trend line.
We didn't break down through all of this previous noise here that had been resisting gains.
So that's a correction it's not a downturn.
This is a little bit more of a downtrend because it was a much stronger.
There is a little bit of a judgment with this and that's part of what makes defining the trend a little
tricky for some traders.
So let me go to the 15 minute chart.
Clearly in an uptrend here clearly you know you could say in a downturn there.
But really when you look at this fall you're talking about a few hours you're talking about 50 120 pips
or so from the very top to very bottom.
I mean yeah that's that's negative but that's hardly the long term trend.
So when you look at trends in the most important thing to focus on is I would say probably the weekly
trend if not the daily trend.
There are certain moving averages that people tend to follow so on Trading View for example you can
go to moving average exponential and a lot of times people will use the 200 day.
That's because it represents a year of Monday through Friday trading goes back to the stock market and
they will follow the overall 200 day moving average.
So as we are rising at this point we're in an uptrend.
We were definitely in a downtrend then you can see that it even offered a little bit of dynamic resistance
and support occasionally.
So that's one way to look at the trend now.
There are other moving averages that people will pay attention to such as the 50 in the 100 day moving
average and they will even extrapolate this stuff down to the 15 minute chart.
So for example they may take like a 20 moving average and you can see that that when I put a 20 moving
average on this chart here it moves much quicker on the 15 minute time frame but it does give you an
idea of what the short term trend is.
As a general rule you want to follow the longer term trend.
You do not want to get stuck in the minutia.
So for example if you saw something like this on a short term chart but we were in a longer term downtrend
then you think of it more as a correction.
You think of this as an opportunity to short from a higher level.
You simply must stick with the higher timeframes if you wish to be successful going back to what I was
saying about consolidation and how the market will sometimes digest gains or losses.
We can take a look at this level here and this level here roughly 115 and 114 in the Swiss yen on the
4 hour chart so you can see for several days we didn't go anywhere.
But that does offer short term trading possibilities.
You know that you came in here through an uptrend.
Typically consolidation does mean continuation eventually but in the meantime a lot of traders will
trade back and forth it comes down to what style you're looking at.
If you're looking for a short term opportunity then that may work or you just simply look for a breakout
of the consolidation that has formed itself because you could see we continue to go further.
If you're familiar with you know rectangles for example the same ideas basically is a rectangle.
Consolidation is just where the market can't go in one direction or the other but it does typically
continue in the same direction it entered.
So in this case up.
And of course it did.
Now it works about directions obviously you can consolidate.
This was a small consolidation after a breakdown and we did continue to go lower.
Consolidation just means there is no trend.
So you're looking more of a range bound type of system.
You just go back and forth a lot of times you cut your position size down and just simply scout the
market.
Now that is when short term trading back and forth can be very profitable but you want to find support
and resistance.
So in this case you could say something to the effect of Well we've hit this line four or five times
we've hit this line four or five times and you go back and forth.
You can even choke up on it here and say that we were in even tighter consolidation to kick this off.
So again it comes down to finding places where markets won't go above or below kind of banging around
for small trades knowing that you're not looking for the world there and then once you break out of
that that continues the overall trend.