Find price action patterns with trends

This method has been around for hundreds of years for a simpler reason: it works. To determine whether the market is trending or not, you just need to observe the price action: Find repetitions of the Higher Highs - HH and Higher Lows - HL in the market going up; and Lower Highs - LH and Lowers Lows - LL in a bear market. For example, a market has a downtrend, confirmed by the repetition of lower highs and lower lows:

So how do you know when a new trend is about to form or an old trend is about to end? We will still use the same method: find HL or LH LL HHs. For example, when you see an HH and HL pattern broken down by the price forming a lower high, it is a sign that the uptrend is about to end. To be sure, however, we need to see at least one LH and LL next to the upside. That means once the price has formed its first lower high (or the price failed to form a higher high), it is necessary to see the price forming a lower low immediately afterward to place a sell order.

Market signs sideways

We can use important support and resistance levels to determine if the market is trending: Find price ranges between parallel support and resistance lines, the market is now moving sideways. like the example below:

Use moving averages to distinguish between trend and sideways markets

Moving averages give clearer signs to tell whether the market is trending or sideways. There are two things to determine: One is the moving average crossover up or down; the second is whether the MAs have divergences with each other or not - a very strong sign of the market. EMAs mark support and resistance zones, and we can look for price action signals when price retraces or moves parallel to the trend:

However, you need to combine this with the method of determining the HH HL and LH LL patterns, because if only based on the moving average the Trader can be confused if the market is range-bound. For example, in item 2 when the market is range-bound, if the MA line is added on the chart, they will cross up and down because the price is fluctuating between the support & resistance lines and changes direction every time the MA crosses...

Trends are your best friend, and hopefully, the article will be useful to you when you need to identify the trend and make a sound decision.

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