In the first part of the emini futures series on Will the trend stop or continue we discussed how measuring the strength of a trend requires two types of tools , which will help you figure out if a trend is going to stop or continue . The first tool was the proper setting of targets according to the higher time period market structure of support and resistance . The second kind of tool would be momentum tools . These tools should be used to make appropriate judgements and apply them to a smaller timeframe than the one you’re trading … basically if a daily chart is the way you’re trading , trying to pick either the low of the day or the high when trading, then for support for the intraday trading decisions you’d be looking at half hour or hourly charts . Momentum tools – what are they? one of the best is a short term moving average ; in a channel system use three moving averages and you’ll have a matrix created, which you can use to measure the strength of the trend against . Various channel systems exist but one of the best is the Drummond Geometry system ( you should have heard about this system in a emini futures) which uses a short term moving average as its center line of the average of the close, high, and low of the last bars that have been completed , projected to a future bar. To this two channel bands are added based on averages of the past 3 pivot points that are similarly managed. Very effective judgments of market strength can be made by looking in relationship to this channel system at where sequential closes occur. You should also establish market “flow” by taking measurements using different price strength aspects, such as how close the close of the bar is to the low or high, the distance between close and open , how large or small the range of the bar is , and the progress that the bar is making through the matrix of resistance and support you have. Yet another tip to remember: Because each time-frame has its own system of support and resistance , watch how difficult or how easily in a trend the lowest timeframe monitor breaks its own support or resistance. The more easily you see this happen , the more the underlying trend is probably going to be robust. In an uptrend , support that is close to the bar’s low will hold , and near by resistance will more easily and more often break . Resistance breaking and support holding in a lower time period- this is a good sign that the trend is strong . These tips should help your stock trading strategy become a consistent winner as you learn how to know when trends are running out of stream and the trends that will go on for a long time. A quality course on technical analysis training can save you a lot of time and money by giving you the right tools to make the distinctions that are so important.
Peter Markham is a Forex trader with 30 years practical experience in the markets. He received his education in Sydney and Los Angeles and has been a trading consultant worldwide. He has written widely on Emini Futures Trading. Among the many choices Peter recommends this Emini Futures trading for an original and productive trading approach.