How do YOU determine a trend change?

Discussion in 'Technical Analysis' started by gruesome, Feb 17, 2006.

  1. gruesome


    How do YOU determine a trend change? Please state your methodology, your reasoning behind the methodology, and how you use it in your trading.

    Here is mine. (See attachment)


    Assume we are in a downtrend and we are looking for a reversal to the upside:

    Part 1: Let price push through a prior resistance level.

    Part 2: Wait for price to make a pullback and resume upward.

    Part 3: A new high after the pullback confirms the trend change.

    This works exactly the same way in the opposite direction.


    1. Contrary to popular belief prices generally trend.
    2. Support and resistance show us where buyers/sellers took a stand.
    3. Breaking support or resistance (aka "fake-out") isn't enough. The confirmation comes when price pullsback and then the initial breakout is exceeded.

    How I use it to trade:
    I wait until I get a change in trend and then get in on a breakout or a pullback. I only have two exits. My profit target will get hit or I will get stopped out.

    NOTE: It is hoped for that this thread can provide an intelligent discussion on how YOU determine a trend change. Please act as if you are a guest in someone's home and behave appropriately. If you don't like someone's methodology or reasoning it is okay to smile and ignore them. Let us know how you do it and why.
  2. Your system sucks !
    Just kidding, like you I hope this thread will remain professional.
    I follow your method, also called 123 but a possible entry in your example would be the break out of your second S , when the instrument comes back from its lowest R. It is generally a good risk/reward trade because the stop loss can be placed quite close to the lowest S.