Post of the Day: Identifying a Trend
Would you agree that this NZDUSD chart has a down trend with a range bound market?
Power Course Instructor’s Response:
I can see how you made the downtrend determination simply be looking at the chart from the left to the right. In doing that alone, you would be correct.
However, there are a few considerations...
The pair has been building higher highs and higher lows since around the beginning of March and it has recently closed and is trading above the 200 SMA. Both of these would be indicative of an uptrend.
In this scenario, we would wait for price action to trade down to trendline support and, if a candle does not close below support, we could take a long position with a stop just below support.
Although the pair, from right to left on the chart, is indeed going down, these other contingencies must be taken into account for a valid assessment.
Take a look at the chart below as an example...