We’ve all heard the saying: “Trends are your friend until they’re not.” The problem is, most of us cannot even identify when a trend has formed or is in the midst of being formed. In this video, I’m going to show you exactly how to identify a trend when it’s premature and when it’s already matured. But also, I’m going to show you exactly how to trade it and how I personally have traded it over the last several years. Following trends and knowing the longer-term horizons of where an asset is going will allow you to get an amazing edge over the markets and position yourself exactly how you need to be positioned in order to make profits.
Welcome to the channel. My name is Matt Jimenez, and if you don’t know who I am, I’m just an entrepreneur who has worked with the greatest minds in finance over the last several years, and I’m here to pour into you guys everything they poured into me.
Without further ado, let’s get right to it.
Trends are just a series of correction movements followed right after an impulsive movement. So if it’s an uptrend, you will have an impulsive movement to the upside followed by a correctional movement into the downside because the correction is always trying to bring it back to a means of normality.
It’s very important when a trend is being formed and how to identify it so you can be on the right side of the trend. You never want to be going short in an uptrend, and you never want to be going long in a downtrend because the odds are you will be getting smoked. What you want to do is go with the trend. If it’s an uptrend, you want a long position. If it’s a downtrend, you want a short position. But that’s not to say in an uptrend you can’t find shorts because you definitely can; the correction movements are where the shorts happen. And then on the flip side of that, in a downtrend, you definitely could find long positions on the correction because a correction in a downtrend is to the upside. The impulsive movements are to the down. But like I said, when you’re trading against the trend, you want to be in and out; you want to be short and sweet. You mainly want to go alongside the trend, never against it.
But it’s pretty unique when you learn how to identify trends and how they move; you’ll be able to find a position on an uptrend for a long, and you could also hedge your bets on the corrections so you can have a long position and a short position at the same time. Now that’s a very advanced strategy. In this video, I’m just going to stick to the basics on how to find the trend, how to trade it, and how I trade it. Now that you got all that, let’s go to the charts.
So we’ll be going over some Forex pairs here. I have the EUR / USD pulled up here, and I’m just going to show you simply how to plot a trend line.
So what you want to do is go over to the top left corner right here, grab this, it literally says trend line on it, so you can’t get confused. And once you see a gigantic impulsive or correction movement, that’s a sign to pay attention to where the next swing low or swing high is going to be. In this case, this was a swing low. Once I identified this movement to the downside, I am now watching how far we can go to the upside. And clearly, we could not make it past this previous high. So that just means that there’s not enough buying pressure, basically telling that sellers are having control of the market at this current moment. And then we had another swing low followed by an attempt to swing high. And again, we couldn’t beat the last previous high. So now we have a clear downtrend formed.
So what you want to do is go ahead and plot it, and you just want to put it along the top of the swing highs here. See, really a downtrend is just a formation of lower highs followed by lower lows, meaning the overall chart is going to the downside. Each high is lower than the previous one, and each low is lower than the previous one. It’s pretty self-explanatory; everything just is going to the downside as a downtrend. And here you can see each time it swings up and each touch there is, those are our opportunities to find our entry to go short because remember the trend is your friend in this situation; you want to be a seller…
Please visit Mastering Trend Identification and Trading Strategies for Profitable Results to watch the full video!