In every technical analysis book you read, they mention that an uptrend is a series of higher tops and higher bottoms. But in no book that I have read do they explain how to precisely identify a top or a bottom leaving the answer to realm of subjectivity. Identifying the correct tops and bottoms is an essential part of any method that uses price action pattern recognition like Avramis Swing Method. In this example, we will go through the minimum conditions for objectively defining the correct tops and bottoms, which are the foundations of what the rest of our price action pattern recognition method will be built on.
The minimum requirement to identify a Top is to have at least 2 large red candles after price reaching a new high. The second condition is that the second large red candle must have a lower-low from the previous large red candle, and a lower high from the previous large red candle. Thirdly the two red candles, do not necessarily have to be consecutive as long as the previous conditions remain for size and lower high and lower low. The reverse applies when identifying bottoms.
Using the SPX as an example as we see here, we have marked the Tops (T1-T4) and the bottoms (B1-B4). Once you have done this correctly identifying the trends and their reversals is very easy.
The definition of an uptrend is HIGHER TOPS & HIGHER BOTTOMS
As we see here, we have higher tops as T2 is higher than T3 and T4, and higher bottoms as B1 is higher than B2 and B3 and B4 showing a confirmed uptrend. Since an uptrend is more likely to continue than to reverse, the market is expected to a continue going up
The creation of T1 however - top lower than the previous top destroys the sequence of higher tops. But the uptrend is not completely destroyed as long as we still have higher bottoms ie as long as prices remain above B1. The moment the price goes below B1, we will no longer have higher bottoms also, and the uptrend is completely destroyed
Signalling a trend reversal to go short
Same strategy is in play with our DAX shorts - see link to related Idea and our video guides in youtube for more information www.youtube.com/watch?v=Y5MWhirV...
The minimum requirement to identify a Top is to have at least 2 large red candles after price reaching a new high. The second condition is that the second large red candle must have a lower-low from the previous large red candle, and a lower high from the previous large red candle. Thirdly the two red candles, do not necessarily have to be consecutive as long as the previous conditions remain for size and lower high and lower low. The reverse applies when identifying bottoms.
Using the SPX as an example as we see here, we have marked the Tops (T1-T4) and the bottoms (B1-B4). Once you have done this correctly identifying the trends and their reversals is very easy.
The definition of an uptrend is HIGHER TOPS & HIGHER BOTTOMS
As we see here, we have higher tops as T2 is higher than T3 and T4, and higher bottoms as B1 is higher than B2 and B3 and B4 showing a confirmed uptrend. Since an uptrend is more likely to continue than to reverse, the market is expected to a continue going up
The creation of T1 however - top lower than the previous top destroys the sequence of higher tops. But the uptrend is not completely destroyed as long as we still have higher bottoms ie as long as prices remain above B1. The moment the price goes below B1, we will no longer have higher bottoms also, and the uptrend is completely destroyed
Signalling a trend reversal to go short
Same strategy is in play with our DAX shorts - see link to related Idea and our video guides in youtube for more information www.youtube.com/watch?v=Y5MWhirV...
Get my tool FREE HERE:
bit.ly/2ODALGH
FREE TELEGRAM GROUP:
bit.ly/3rYHjyd
GET MY FREE EDUCATION HERE:
bit.ly/3pQudRX
bit.ly/2ODALGH
FREE TELEGRAM GROUP:
bit.ly/3rYHjyd
GET MY FREE EDUCATION HERE:
bit.ly/3pQudRX
www.youtube.com/watch?v=-MHLnwcD...