What is a Trending Market?
A trending market is one whose price shows sustained momentum towards a particular direction.
If the price shows sustained momentum upwards, then the market is trending upwards.
However, if the price shows sustained momentum downwards, the market is trending downwards.
Now, I know you are used to heavy reliance on technical indicators such as moving averages to identify a trending market.
You must have been looking for a way to identify a trending market without indicators, right?
Well, in today’s post, I’ll show you how to identify a trending market without indicators.
You can be sure that every word is worth your time.
Identifying a Trending Market without Indicators.
What should you do to identify a trending market without indicators?
The answer is to use price action.
And here’s how to go about it.
Strip Your Chart off all Technical Indicators.
If there is one thing you should be afraid of, it is the bias that an indicator left on your chart can cause when establishing the trend.
That is the reason we recommend that your chart should be stripped naked, to mean, it should be clean with no indicators at all.
We intend to apply pure price action to determine a trending market.
That way, anything else will be irrelevant, and the fact that we want to do it without indicators is even enough to rule out all of them.
Remove any indicators on your chart before you proceed to the next steps of this guide.
It’s mandatory. Haha.
Define Your Timeframe.
What timeframe do you want to be doing your analysis on?
Is it a short timeframe such as 5 minutes, 15 minutes, or 30 minutes?
Or is it a long timeframe such as 4 hours, Daily, Weekly or so?
You don’t want to be confused using multiple timeframes.
You are a witness to the fact that almost always, you view the 5-minute chart and it is on an uptrend, but the 1-hour chart is on a downtrend.
That breeds nothing but confusion.
What you need to do is to define your timeframe and stick to it.
If you are a short-term trader, choose a short timeframe of your choice and stick to it always.
However, if you fancy long-term trading, choose a long timeframe of your choice and be consistent with it.
Stop hopping from one timeframe to another.
You will get confused for no apparent reason.
Use a Definite Number of Candlesticks.
So how many candlesticks do you use on that chart timeframe of yours to determine the trend?
Is it 50 candlesticks, 100 or 200 candlesticks?
What exactly is the number?
I know you don’t have a definite number of candlesticks which you use. That is why you have been doing it the wrong way, where any number is okay with you.
But you are about to change your approach now, thanks to this post.
So let’s say you trade on the 15-minute chart timeframe.
You should choose a constant number of candlesticks which you will always use, say 100.
It is the same thing for every other trader.
Say you trade on the Daily chart timeframe. You can choose a definite number of candlesticks to always use, say 50.
Stop not giving a damn about the number of candlesticks on your screen. It matters a great deal.
Observe Price Swings.
Let’s get off the prerequisites and dive into business now.
Observing price swings is one of the ways to identify a trending market.
But what do you look for in the price swings though?
You look for the manner in which the price swings are forming.
I will explain it.
A market will show an upward price movement such that it forms progressively higher highs and lows.
What can be said of such a market is that it is trending upwards.
In another scenario, a market will show a downward price movement, such that it forms progressively lower highs and lows.
Once you spot such a formation, then the market is trending downwards.
As easy as that, and you have already established a trending market.
Was there any need for a technical indicator?
You tell me.
Observe Price Momentum.
Here is another manner in which you can identify a trending market – observing price momentum.
I know you are wondering what price momentum is, but you need not worry.
Price momentum is the rate of acceleration of the price towards a particular direction.
If the price moves upwards with high speed, then its momentum is upwards.
If on the other hand, the price moves downwards with speed, its momentum is downwards.
What can you say about a market whose price momentum is upwards?
If you said that such is an upwardly trending market, then you nailed it.
What can you say about a market whose price momentum is downwards, instead?
If your answer is that such a market is trending downwards, then you got it right.
Show me a single instance where you needed a technical indicator to observe the price speed and I will dash you $100.
Is there any?
Observe Chart Patterns.
Chart patterns are sets of candlesticks that form definite shapes meant to imply upwards or downward price movements.
So there are chart patterns that point to trend reversals and others that hint at a trend continuation.
The chart patterns I am talking about here are those that point to a trend continuation.
They will effectively show a trending market without any need for a technical indicator.
Upward trend continuations chart patterns include:
- Ascending Triangle.
- Bull Flag.
- Rectangles on uptrends.
- Cup and handle pattern.
Downtrend continuation chart patterns include:
- Descending Triangle.
- Bear Flag.
- Rectangles on downtrends.
Observing Support and Resistance.
I know you are shocked why I have support and resistance here, right?
Well, a trending market is not always upwards and downwards.
There is what we call a sideways trend, where the market ranges within an upper resistance and lower support levels.
You don’t need an indicator to identify support and resistance.
Just observe a zone where candlesticks tend not to close above (resistance) or below (support).
If the market trades within a range, then the conclusion is that it is a trending market, but sideways.
You know how to trade such a market, right?
Buy at support and sell at resistance.
You now have more than enough ways to identify a trending market without any indicators. Use them on your trading account to grow your account without stress.