Stocks & Commodities V. 26:13 (8-14): Forex Focus: Determining The End Of The Trend by Jody Samuels

Forex Focus: Determining The End Of The Trend by Jody Samuels

One of the keys to doing well in the forex market is to apply reversal pattern and indicator tools to know when the trend is over and when the next one is starting. Here’s how.

Would you like to be able to target the end of a sequence so you don’t end up holding the bag? Or would you rather continue to do what most novice traders pretend not to do, which is to buy highs and sell lows? In the 1930s, Ralph Nelson Elliott discovered that stock markets traded in repetitive cycles that were actually a reflection of the emotions of investors. By understanding Elliott’s contributions depicting the psychological structure of market behavior and combining it with other patterns and indicators, we will be able to plan for the future and develop a framework for establishing positions before the market turns.

In this article, we assume we have the following basic knowledge of Elliott wave theory, which is that markets move in impulsive five-wave sequences in the direction of trend and correct in one or more three-wave patterns in the opposite direction before resuming the trend.

THE “END OF THE TREND” CHECKLIST

Several techniques are used to pinpoint the end of a trend. We will present a checklist of six confirming methods, which when combined will impart the necessary confidence to plan the trade and trade the plan. The checklist includes:

1.) Channeling to target the end of a sequence The channeling technique is a useful tool for projecting the end of a trend-defining five-wave sequence. Elliott noted that trend moves are usually contained within parallel lines or channels. This channeling methodology is often used to delineate exhaustion zones, after which we would expect to see a trend reversal as long as the other confirmation signals are also present. It serves as an optimal timing guide, giving the trader a competitive edge.