Trending Markets

One of the most important Skill that you need as a trader is the ability to read the market structure, it is critical skill that will allow you to use the right  price action strategies in the right market condition .

if you can master this skill , when you open your chart , you will be able to answer  these important questions .

What the crowds are doing ? who is in control of the market buyers or sellers? What is the right time and place to enter or to exit the market and when you need to stay away?.

Through your price action analysis , you will experience three types of markets .

• Trending markets
• Ranging markets
• Choppy markets

1.Trending markets

Bullish Trending Markets

Trending markets are simply characterized by a repeating pattern of higher highs and higher low in an up-trending market, and lower high and lower low in a down trending market .

As you can see the above example, the market is making series of higher high and higher lows which indicates that the market is up trending .

Trending markets are easy to identify, don’t try to complicate your analysis, use your brain and see what the market is doing

If the market is creating a sequence of higher highs and higher lows, it clearly represents an uptrend. On the other hand, if the market is forming a series of lower highs and lower lows, it is unmistakably a downtrend.

To check if the market is moving in a clear direction (trending) or not, look at bigger time frames like the 4-hour, daily, or weekly charts. Avoid using smaller time frames for this because they can be misleading.

Bearish Trending Markets

Bearish Trending markets are simply characterized by a repeating pattern of lower high and lower low in a down trending market .

The example above shows a bearish market, as you can see there are series of higher lows and lower low which indicate an obvious downtrend.

if it is making series of lower highs and lower low, it is obviously a downtrend market .

How to trade trending markets ?.

If you can recognize whether the market is trending, making trading decisions becomes much easier.

• In a bullish (upward) market, prices are generally rising. This means you should focus on buying opportunities because the trend is in your favor. Buying in an uptrend increases your chances of making a profit as prices continue to climb.
• In a bearish (downward) market, prices are consistently falling. In this case, you should look for selling opportunities, as the market is more likely to continue moving downward. Selling in a downtrend allows you to benefit from further price drops.

Trending markets consist of two key price movements: the impulsive move, which reflects strong momentum in the direction of the trend, and the retracement move, which represents a temporary pullback before the trend continues. Understanding these movements is essential for effective trade execution.

Observing the market structure, we can see a series of higher highs and higher lows, signaling a bullish trend. In such a market condition, traders typically look for buying opportunities. Additionally, the price movement consists of two distinct phases: the impulsive move, which represents strong momentum in the trend direction, and the retracement (pullback) move, which is a temporary price correction before the trend resumes.

Professional traders understand how trending markets move; they always buy at the beginning of an impulsive move and take profits at the end of it.

This is the reason why the market makes an impulsive move in the direction of the trend and retraces before it makes another impulsive move.

Understanding how trending markets behave is crucial for making informed trading decisions. The optimal entry point for a buy trade in an uptrend is at the beginning of an impulsive move, where the market gains strong momentum.

Traders who enter a buy position during the retracement (pullback) phase often fall into a common trap set by professional traders. As a result, their stop-loss levels are triggered before the market resumes its intended direction. This occurs because they fail to recognize the natural price fluctuations within a trend, leading to premature exits before the actual momentum-driven move begins.

See another example of a bearish trend.

The illustration above depicts a downtrend market. As observed, the most strategic trading decision is to enter a sell position at the onset of an impulsive move, where the market exhibits strong downward momentum. This approach maximizes profit potential while aligning with the prevailing trend.

Selling during a retracement phase can lead to unfavorable outcomes, as experienced traders often take advantage of such entries. Since retracements are brief corrections within the larger trend, the market is likely to reverse, causing the trade to fail.

Now we understand how to spot when the market is going up (uptrend) or down (downtrend). We also know the difference between a strong price movement (impulsive move) and a temporary pullback (retracement).

To predict the beginning of the impulsive move in a trending market, you have to master drawing support and resistance levels.

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