Identification between trend reversal and retracement?

Hello friends,

 

Very often, I find myself confused while making a trading decision under this circumstance - After a good move, the price retraces upto certain level or let's say there's a pullback. Now, let's say under the present situation in the chart below (an example), what would be your decision?

 

http://i43.tinypic.com/moo5f.gif

 

How & why would you personally decide if you would close your long position and initiate a short or simply hold your long trade?

 

 

Thank you

Edited April 2, 2010 by sheetal

you can go through Michael Parson's Channel surfing to arrive at a conclusion, as long as price is within the channel, it is

within the trend, and as soon as price has travelled above or below the channel, is indicating current trend is over.

Hi

On top of prashant_trader comment, I might add bollinger band and use candlestick pattern (at key level or confluence)

to judge whether the trend is over or reversing.

Or look Mcdady's (Macdbay) videos about price momentum :) .. he would say definitely UP UP UP (pullback) :D

http://indo-investasi.com/showthread.php/4660-McDaddy-Trading-course-Price-Behavior?highlight=macdbay

 

Barbara

 

p.s. BTW this is not the place to enter the trade (your sell)

Edited April 4, 2010 by barbara

sometimes it is very hard to decide

i urge you to please take a look at Bill McLaren's "Foundations for Success" (videos). I've watched a lot and i must say his videos are excellent regarding understanding of trends...

i urge you to please take a look at Bill McLaren's "Foundations for Success" (videos). I've watched a lot and i must say his videos are excellent regarding understanding of trends...

 

Hi radical,

 

Where could I find them? Because I often get confused & nervouse while entering in a retracement.

 

Anybody, could please provide some insights?

 

Thanks

Hi Sheetal,

 

I do not know if you have your answer to this question yet, But your question is quite genuine and does create quite a predicament in deciding to trade or not. How ever what I do is to use look at the same chart in two higher time frames and decide if it is a reversal or a retracement. i hope that helps.

Hi prashant_trader,

 

Would you please to share Michael Parson's CHANNEL SURFING?

 

Thanks in Advance,

Anton

 

 

 

you can go through Michael Parson's Channel surfing to arrive at a conclusion, as long as price is within the channel, it is

within the trend, and as soon as price has travelled above or below the channel, is indicating current trend is over.

This is where you would pull out your fib tool. I dont know how long you've been trading, but I would look at that chart straight away and go long providing one of the fib lines meets the pullback and dont forget money management if you were wrong!

:-)

If you're not sure, if it's a trend change or a retracement, why not wait for the 2nd entry signal in the new trend direction, and just skip the first trade?