Identifying Trend Changes...

I understand that you never want to try to catch falling knives, or try to stop a 5 alarm blaze with a super soaker... I always want to trade with the trend. That said, I'm having trouble learning when the trend is changing and when I should start placing trades the OTHER way.

A perfect example is EURUSD has been in an uptrend, however, last week on around 3/7 or 3/8 a small downtrend started taking it from 14034 to 13750. Then an uptrend started again immediately.

Everyone talks about letting the market show you where it's going... how do I know if it's a minor pull back vs an actual trend change.

The trouble is you can't see a trend until it's become one. You need some points to reference and to add confusion it can be subjective.

Personally the trend on EU never changed for me. It pulled back to a trendline and slightly penetrated it but still closed back above the line. But that was on the daily chart. On the hourly chart things may look different but I don't trade that if I can help it

When the trend gets weak or you don't know what do do, then you get out. Once the trend reestablishes itself or it establishes itself the other way you begin entering again.
Don't try picking tops & bottoms. Not gonna work.

Thanks both of you for the great help...

That's a good thread because I had trouble with trends exit as well... and I wanted to know, you said a daily chart will sho it, but is it also doable as a DT, so in a 15min or 30 min charts? Or is trend trading better on weekly trades? ty =-)

Simon

Nothing wrong if you want to catch a falling knife, it's common thing for swing trader to open their position like that. Every style has a positive & negative side, but you must understand the basic about forex market first before stepping further in. Important thing about supply & demand, how the order can move the price, who's behind that order & why they put their order there. If you understand the micro structure of this market, at least you'll not get shocked when some time in the future market move "unpredicted" by some kind of indicators, because indicators is lagging & market will not give a damn care about that, what market see is where liquidity reside, just like a thirsty man chasing a bottle of water.

You correctly identified this trend, so, if we accept that a trend will pull back, why not try entering on the pull back (on the daily, in this case). Put a stop order at the top of the first pull back bar. If it pulls back further use the next bar, and so on.

You would be in the trend at 1.3585, SL would be the bottom of that bar, about 100 pips away. Try doing a bit of back testing with this idea and refine it. It won't always work that well. Practise on the hourly chart. What would have happened if you had used the hourly chart to get into that daily trend? Less risk, right?

I'm speaking with regards to EurUsd during the first few hours of the NY session using 3 range bars. Other pairs and times likely differ in the behavior.

Anyway, the pair will range for a while usually making higher high or lower lows for a good distance. Then suddenly it will either A) Make another higher high/lower low but juuuust barely, maybe even by just a few pips then start to range or reverse. Or B) it will fail to make a higher high/lower low producing either a double bottom or top, or near to it, then it will begin to range or reverse.

When either of those two things happen you can pretty much count on the trend having a good pullback or a complete reversal. You can never tell exactly which one it will be but either way it's knowledge you can use.