Regarding the Expected Direction (Expected Trend Identification) we have many ways, we can read price action, support levels, resistance, or the overall market trajectory. We can follow the Dow Theory, which assumes the market will continue to move in the same direction until something equal or larger can hit and cause a trend reversal or breakdown.

Intended direction plays a very important role in trading and practicing trading strategies, including “trend reversal” or “trend following”. The intended direction will help a trader determine the direction of the market trend and also determine what we will do.

Once the Intended Direction is established, a trader will be more confident in implementing a planned trading strategy and not trading against or on sentimentality.

A well-prepared transaction involves setting the Intended Orientation and it is a two-part process:
  • Predict the direction the price will move (up or down).
  • Identify trigger conditions or rules that trigger a trade that confirms the trend you just forecast.
If a trader only establishes a market direction prediction it will not be enough. They will need to have some trading rules to confirm the trend they just forecast, otherwise, we will not know whether the forecast is true or false. Expected Direction Confirmation is a great habit to have and it will improve the odds of success.

A successful trading strategy depends on how we think about the market, which is more about opening techniques and trading plans.

Here are two ways to confirm the Intended Direction:

1. Determine the Expected Direction through price action:

The easiest way to set up an Expected Direction is through price action analysis. If the price is moving higher, making higher highs and higher lows, traders should buy. If the price is falling, making lower lows and lower highs, traders should sell


Picture 1: USD / JPY daily chart

2. Set the Expected Orientation through the moving average:

The deviation can be concluded through the use of technical indicators such as the Moving Average. In technical analysis, the 200-day Moving Average is considered to be one of the strongest moving averages. If the price is trading above the 200-day moving average, the trader should set the orientation to buy and if the price is trading below the 200-day moving average, the trader should set the orientation to sell.


Picture 2: AUD / USD daily chart

Conclusion

The Intended Direction Setting process needs to be straightforward, if it becomes too complex it risks adding complexity to the existing trading strategy. In the end, this is a simple psychological rule, but it can help you improve your trading performance by specifying in advance that "I'll buy/sell in this case!"