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Stephen Nderitu <> Fri, Jul 28, 2023 at 20:46
To: Stephen Nderitu <>
THE MARKET STRUCTURE (DETAILED TEXT LESSON)
When a market is moving in one general direction from left to right on the chart, either up or down, it is called a trend or a market bias. If a market is moving
up, it is said to have an uptrend, or a bullish trend, if it is moving down, it is said to have a downtrend or a bearish trend. These can also be called bullish bias
or bearish bias.
The easiest and most effective way to identify a trend is by observing a market’s raw price action from left to right. As a market moves higher or lower, its
previous turning points or swing points, become reference points that we can use to help us determine the trend of a market.
The easiest way to identify a trend is to check and see if a market is making a pattern of higher highs and higher lows for an uptrend, or lower highs and
lower lows for a downtrend. See the diagram below:
As you see in this simple example above, the diagram shows us the basic idea of looking for higher highs and higher lows for uptrends and lower highs and
lower lows for downtrends. To be honest with you, sometimes the market makes it difficult for us to identify a trend, it is not always clear like this, but with
screen time and practice, you will be able to easily identify a trending market. Now let me give you a real chart example below:
As you can see in the H4 chart above, the market is making a pattern of lower highs and lower lows. You don’t need to be Elbert Einstein to decide whether
the market is trending down or up. Only a general observation of swing points can help you identify the market trend. Now let me give you a real chart
example of an uptrend below:
, As you see in the EUR USD daily chart above, the market is making clearly higher highs and high lows pattern which indicates an uptrend market.
You shouldn’t have to think too hard whether a market is trending or not. Most traders make the trend discovery way too difficult. If you take common sense
and patient approach, it is usually fairly obvious if a market is trending or not, just by looking at the raw price action of its chart from left to right. Make sure
you make the swing points on your chart as it will draw your attention to them and help you see if there is a pattern of HH and HL or LH and LL as discussed
above.
The impulsive and the retracement move
Trending markets are characterized by two important moves, the impulsive move, and the retracement move. You should be able to identify these moves
when you are analyzing a trending market, otherwise you will not be able to make the right trading decisions. So let’s start with the first move which is an
impulsive move.
An impulsive move is one where the market moves strongly or heavily in to one direction, covering a great distance in a short period of time. They are
generally more volatile, and they provide us with good risk to reward ratio. See the illustration below:
As you can see on the AUD USD daily chart above, the market is trending down, the impulsive move starts from the beginning of the higher low swing points,
1 message
Stephen Nderitu <> Fri, Jul 28, 2023 at 20:46
To: Stephen Nderitu <>
THE MARKET STRUCTURE (DETAILED TEXT LESSON)
When a market is moving in one general direction from left to right on the chart, either up or down, it is called a trend or a market bias. If a market is moving
up, it is said to have an uptrend, or a bullish trend, if it is moving down, it is said to have a downtrend or a bearish trend. These can also be called bullish bias
or bearish bias.
The easiest and most effective way to identify a trend is by observing a market’s raw price action from left to right. As a market moves higher or lower, its
previous turning points or swing points, become reference points that we can use to help us determine the trend of a market.
The easiest way to identify a trend is to check and see if a market is making a pattern of higher highs and higher lows for an uptrend, or lower highs and
lower lows for a downtrend. See the diagram below:
As you see in this simple example above, the diagram shows us the basic idea of looking for higher highs and higher lows for uptrends and lower highs and
lower lows for downtrends. To be honest with you, sometimes the market makes it difficult for us to identify a trend, it is not always clear like this, but with
screen time and practice, you will be able to easily identify a trending market. Now let me give you a real chart example below:
As you can see in the H4 chart above, the market is making a pattern of lower highs and lower lows. You don’t need to be Elbert Einstein to decide whether
the market is trending down or up. Only a general observation of swing points can help you identify the market trend. Now let me give you a real chart
example of an uptrend below:
, As you see in the EUR USD daily chart above, the market is making clearly higher highs and high lows pattern which indicates an uptrend market.
You shouldn’t have to think too hard whether a market is trending or not. Most traders make the trend discovery way too difficult. If you take common sense
and patient approach, it is usually fairly obvious if a market is trending or not, just by looking at the raw price action of its chart from left to right. Make sure
you make the swing points on your chart as it will draw your attention to them and help you see if there is a pattern of HH and HL or LH and LL as discussed
above.
The impulsive and the retracement move
Trending markets are characterized by two important moves, the impulsive move, and the retracement move. You should be able to identify these moves
when you are analyzing a trending market, otherwise you will not be able to make the right trading decisions. So let’s start with the first move which is an
impulsive move.
An impulsive move is one where the market moves strongly or heavily in to one direction, covering a great distance in a short period of time. They are
generally more volatile, and they provide us with good risk to reward ratio. See the illustration below:
As you can see on the AUD USD daily chart above, the market is trending down, the impulsive move starts from the beginning of the higher low swing points,
