The formation of Higher highs lower lows in the forex represents the direction of the forex market either bullish or bearish. Identification of trends in the forex is the first step of technical analysis in trading.
We are talking about the most important topic in forex trading technical analysis. Every Trader should know about trends in forex and how to identify trend reversal in forex.
ABC of technical analysis is “Always trade with Trend”. It means we have to apply our strategy in the direction of the trend and we should avoid moves against the trend.
Types of trends in forex
The trend in forex represents the control or power of buyers or sellers in the market. if buyers are stronger than sellers then the market will move upward. The equal force of both buyers and sellers indicates the sideways movement of the market. If sellers are more powerful than buyers then the market will move downward.
Higher highs and higher lows in forex mean the high and low of the recent candlestick is higher than the high and low of the previous candlestick consecutively. It represents that market is in a bullish trend and buyers are controlling the market.
There is strong buying pressure. A lot of traders are buying the currency and buyers have dominated the sellers. This results in the upward movement of price with time.
Lower highs and lower lows
Lower highs and lower lows mean the low and high of the recent candlestick is lower than the lower and high of the previous candlestick. The formation of consecutive lower lows and lower highs in the price of a currency during a specific timeframe is referred a bearish trend in forex trading.
It indicates strong selling pressure and the number of sellers is greater than the number of buyers. A lot of traders are selling the currency which results in a downward movement of price with time.
Lower highs mean the high of the recent candlestick is lower than the high of the previous candlestick.
Higher High and Lower High | Trend Trading Strategy
The formation of lower low and lower high after three consecutive higher highs and higher lows in the market indicates a bullish trend reversal.
if the market is in a bullish trend and it forms a pattern like explained below in the image, then it is a sign of the change of trend.
A bearish trend reversal means the formation of higher high and higher low after three consecutive lower lows and lower highs in the market structure.
Trend reversal trading strategy
I will show you a live example of a bearish trend reversal in the EURJPY currency pair on a weekly timeframe.
Price is forming Lower lows and lower highs consecutively in the EURJPY currency pair. The last high was in the month of March. Price has made four lower lows and three lower highs. In June 2019, the price has broken the last lower high. It means the price is going to reverse its bearish trend into bullish. The downtrend is about to end.
Trendline breakout with a big bullish candlestick also indicates a trend reversal. After trend reversal, we will look for buy opportunities on the chart and will open a buy trade according to a specific trading strategy.
This is the best strategy to predict the trend and trade the trend.
Now you will be able to do trend analysis in every setup or analysis before placing an order. Don’t forget to do trend analysis every time before placing a trade.
Conclusion
Trading with trends is a vital part of technical analysis. because we have to trade with the banks or trends created by banks/institutional traders. if you will trade against the trend then you will lose in most trades. In technical analysis, the first step to analyze a currency pair is to do higher high and lower highs analysis. I will recommend you to do trend analysis on daily timeframe candlesticks and then trade in the direction of the trend on lower timeframes.
In summary, higher highs and higher lows are the defining characteristics of an uptrend, while lower highs and lower lows signify a downtrend. These patterns help traders identify the prevailing market direction and inform their trading decisions accordingly.
Compare the latest high with the previous high. The latest high is a higher high if it is at a price level higher than the previous. If the price is lower than the previous high, it is a lower high. Follow the same procedure to locate lows and deduce higher or lower lows.
In trading, HH (Higher Highs) and LL (Lower Lows) refer to key price levels on a chart. Several strategies use these patterns, such as trend following and breakout trading. In an uptrend, traders seek HH and buy on pullbacks to capitalize on upward momentum.
Look for a series of peaks (highs) and valleys (lows) in the price movement. If each subsequent peak is lower than the previous one and each subsequent valley is also lower than the previous one, it indicates the presence of the pattern.
In simple words, open high low strategy is a strategy in which the buying signal is generated when a stock has the same value for both, open and low. Similarly, the selling signal is generated when the stock has the same signal for both - open and high.
Triangles. Triangles are a common pattern and can simply be defined as a converging of the price range, with higher lows and lower highs. The converging price action creates a triangle formation. There are three basic types of triangles: symmetrical, ascending and descending.
1)Simply if current down fractal low is higher than the previous down fractal low it will be a HL. 2)If current up fractal high is lower than the previous up fractal it will be a LH. 4)And if the current up fractal high is higer than the previous up fractal high it will be a HH.
The first high (H) is followed by the first low (L), which in turn is followed by the second high (HH – higher high). After that, if the price drops out of the trend structure and forms a lower low (LL), a trader should be ready to sell, when the price reaches a certain level, which we will discuss later.
The “reflexivity” theory: Reflexivity is the cornerstone of Soros' investment strategy. It's a unique method that values assets by relying on market feedback to gauge how the rest of the market is valuing assets. Soros uses reflexivity to predict market bubbles and other market opportunities.
The Wheel Option Strategy, or Triple Income Strategy, is designed to maximize premium income through the use of cash secured puts, straddles and covered calls.
For instance, when trading in an uptrend, you can place your stop-loss below the most recent higher low to protect your funds against a potential trend reversal. On the other hand, when a downtrend occurs, you can set your stop-loss above the most recent lower high.
The first step in using a forex signal is to first choose a reliable signal provider that uses trustworthy platforms to provide close to accurate signals. Conduct market research to choose the reliable forex signal provider that has a high reputation and strong past performance in the market.
You can spot an uptrend when there are higher highs and lows as time passes. To apply a trend line on a chart that you believe is on a bull run, simply plot a line between three or more of the market's low points – when it has dropped to a low price and reversed.
Key levels, also known as support and resistance levels, are significant price levels on a Forex chart where traders expect a reaction. These levels represent areas where the price of a currency pair is likely to encounter buying (support) or selling (resistance) pressure.
The idea is to buy the strongest stocks (as measured against the performance of the overall market), hold these stocks while capital gains accumulate, and sell them when their performance deteriorates to the point where they are among the weakest performers.
A lot of volume trades a tick or so from the low print and buyers don't seem to be interested in lifting prices higher. This is a weak or poor low and there is a generally tendency to revisit that low within that session or immediately after that session.
Key Takeaways. Range is the difference between the high and low prices in a given trading period. Range-bound trading is characterized by prices staying in a definable range over time. The amount of change in a range depicts the level of volatility that a particular security is experiencing.
Introduction: My name is Patricia Veum II, I am a vast, combative, smiling, famous, inexpensive, zealous, sparkling person who loves writing and wants to share my knowledge and understanding with you.
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