✔️ Information reviewed and updated in November 2023 by Eduardo López
Trends are one of the most important indicators when it comes to operating in the Trading, Forex and stock markets, since they tell you where the wave is going. In other words, the trend tells you whether the market is going up or down.
Detecting the change in the trend will help you make better financial decisions which will allow you to know if it is convenient to sell, buy or wait. Next, we will tell you what are the available ways to detect a change in market trends.
➡✨Use Japanese candles
- Doji candles: When the candle has a large wick after a bullish move, a bearish move is likely to come. If the wick is large after a bearish move, then a bullish one is coming. Lastly, if the wick has a small body in the middle, a trend reversal is likely to come.
- Wrapping candles: Engulfing candles are formed when two candles of different color come together. Here you must take into account that the change in trend occurs when the second candle closes at more than half the body of the previous candle. We must also consider whether it is bearish-bullish or bullish-bearish.
- Double or triple floor / ceiling: This is represented when the height, ceiling, or floor of the graphic patterns is broken. Usually the ceiling and floor are determined mathematically and when these are exceeded, it is a sign of change.
- Wedges: According to experts, having an ascending wedge signal breaking the lower line, this translates into a sell signal.. Otherwise, when the wedge is descending breaking the upper line, then this is a sign that it is time to buy.
- Shoulder, head and shoulder: Similar to the pattern of the tops and the dreams, the HCH is a good way to represent changes in the downtrend and upward trends. Its interpretation is very similar to the first graph, so we can use it both as a complement and as a substitute.
- Divergences: These types of divergences are usually occasional, but quite revealing. Experts classify them as indicators that mark both highs and lows that go in the direction set to the maximum and minimum of the price of the asset, which generates a divergence.
- Overbuying and overselling area: Another signal that, although not 100% reliable, may be an indication, is the exit from the overbought zone and the oversold zone. If the price exceeds the oversold zone, then you must sell and if it exceeds the oversold zone, you must buy.
➡✨ To take into account
While these indicators are good for finding movements in trends, both used individually and together, they are not 100% accurate. So You must do a good analysis before making any decision about changes in trends.