Trend Analysis
Figure 5.36 shows price finding support and resistance at prior peaks and
troughs, as well on the rising channel on the 30‐min chart of the EURUSD. No-
tice the cycle‐tuned stochastic oscillator providing additional confirmation at
the support and resistance levels, being overbought at resistance and oversold
at support.trading in the Direction of the trend
To trade or initiate positions in the direction of the existing trend means to buy in
an uptrend and short in a downtrend. It is generally easier and safer to trade in the
direction of the existing trend for a variety of reasons, some being:■ (^) Buying dips in an uptrend and selling rallies in a downtrend gets the trader
into positions where positions are initiated at the most advantageous prices
with the smallest stopsizes possible.
■ (^) The trader is able to hold onto positions initiated in the direction of
the existing trend and as a consequence extract greater profit from the
markets.
Buying on a dip and selling into a rally are examples of retracement entries
taken in the direction of the existing trend. Figure 5.37 illustrates buying on dips
in an uptrend and selling into bear rallies in a downtrend. A trader may use simple
up and down trendlines or channels to time the retracement entries. The use of a
cycle‐tuned oscillator will also help fine‐tune the entries.
figure 5.36 Support and Resistance Role Reversals on the 30‐Min Chart of the
EURUSD.
Source: MetaTrader 4