trend Changing and its signs before it happens
In this article, we are going to discuss about the topic of trend Changing and its signs before it happens. In fact, we detect the change of the trend earlier than what happens in the main trend from the setups of the secondary trend. Stay with us to check this issue on the chart and introduce practical trend change setups.
In the image below, the price has been going through an uptrend on the daily time frame.
But as you can see, the price faced weakness at the end of the uptrend and broke the last bottom formed. Here we realize that the price needs correction and we may have entered a bearish trend. We used the word “probably” because the price has not definitively entered the downward phase yet.
we said that the price has probably been corrected, so we are looking for sell setups to enter the trade. One of the best setups is to enter from the end of correction or the P3 setup. In this setup, we are looking for a position to sell at point P3, but how? How to recognize the end of correction?
It is possible to detect a trend change with a Hammer candle. If you see a hammer candle in P3 price on the daily time frame (Primary), that is probably the turning point of the market. Be careful that you should see a red hammer for sales transactions and a green hammer for buying transactions to have a stronger confirmation.
As you can see in the image below, the price has formed a red hammer candle at the ceiling after making wave 3. So we can expect the price to drop from this point.
But what to do to find the point of entry? We will also examine how to enter the transaction.
To find the entry point, we need to go to the hourly time frame (Secondary) and get help from the Secondary Trend setups. Because it is not wise to enter the trade in a big time frame like daily. Due to the fact that daily setups often have large stop losses and are not suitable for our small capital, so we have to take help from the second trend setups.
To enter the trade, we open the hourly chart next to the daily chart to see what happened on the hourly chart in the hammer candle formed on the daily.
Here is the daily chart on the left and the hourly chart on the right. The range marked in white is basically the daily hammer candle, which we separated from the rest of the chart in this way. As you can see on the hourly chart, we were in an uptrend which is basically the daily correction or the daily P3 wave.
In the one-hour chart, after the rise, the price has weakened and broke its previous P3. Here we notice that the daily P3 wave has ended and the price is about to enter a downward trend.
Here we can enter the sale transaction according to the entry setup from P3. This entry can be a Sell Stop or you can wait until the price returns to the broken P3 and enter the transaction there. How to enter this trading setup is shown in the image below.
at the end, we remind you again that we use trend trading only to understand the trend and to find the entry points and the appropriate place for stop losses, we use more advanced and accurate methods that these methods are taught in the specialized course. You will learn volume trading.