Reference to the context.
Almost every retail trader wishes to have a trading system that worth – Elaborately pointing out for them when and why to make decisions.?!!!
I have come across a number of traders who always eager to learn.
When I see their charts they have flourished with elegant colours and always put the number of tools onto it.
However, it often messed up one way or another, while any abrupt move in the market.
consequently couldn’t manage their trades and bear heavy losses.
What if I introduced you to a system that hadn’t any tool whatsoever.!!!
Sound catchy but How?
In order for this, You need to stay with me!!
Firstly, You have to go to the basics. Let’s dive into it!!!
Apparently the market has three major trends.
Definition of Uptrend!
Noteworthy in an uptrend, the market makes the sequence of Higher high and Higher low, the trend probably continues to days, months or years.
Therefore, we have to observe and see things that suit our trading perceptive. So that we could make crystal clear decisions.
You probably hear the saying” trend is your friend” thus ultimately, we should always try to take a position in favouring of the trend.
Look upon the chart below, it’s a GBPUSD chart, I have chosen the hourly time. You may choose any time frame which suits you, there isn’t any restriction in this regard.
Higher High is a Macro trend!
In an upward trend, the higher the high refers Macro trend.
Lower High/Micro Trend!
Similarly, the lower high as mentioned above is normally referred to as a micro-trend thus I need to enter into buying for a buying trend but at the end of the Micro trend.
Please note down that the last downward leg’s end is a LOW whereas previous High (highlighted in blue ) is our point of consideration.
Subsequently, the market breakaway that high and posts the series of Higher High and Higher low (Mentioned in blue ).
Technically, we are in an uptrend. by viewing Higher High and Higher low.
Now, what if someone asked you for placing the trade, obviously BUYING.
But when? for this, you need to wait for CONSOLIDATION.
Consolidation is a stage where the market is in range-bound. At this point in time, you have to wait to end the consolidation for buying ( in an uptrend ).
In an uptrend, the end of consolidation is normally referred to as lower high. for pointing this you must be understood that the market after posting higher high making a lower high, the high which isn’t break the previous higher high.
At this juncture, you put a trend line and draw the trend and connect the two highs, so that you will get a buying position like this.
Similarly, where the market breaks your trend could be the buying point.
As mentioned above in the green horizontal line.
Whereas your stop loss would be the previous LOW or couple of points below of previous low. The mentioned red horizontal line in the chart.
Likewise, your possible target would be the first high (the high where you’ve sketched the trend line. ) in the above-said chart it mentioned as a black horizontal line.
You may see a substantial risk-reward ratio in this trade.
2nd Possible Buying Chance!
Though we have exited from our first trade as mentioned in the chart by highlighting the black horizontal line.
Apart from the buying trend, we are now pursuing buying waiting lower high and end this lower high.
Due to this we now wait for another higher high and lower low and connect the previous to high one is Higher High and another one is Lower High which deems the end of micro trend (consolidation period ) like this:-
You may see again the green line is your buying target. it is the end of the consolidation period which posted lower high. we connected higher high and lower high. whereas the stop loss would be the previous Higher low and reward may by 1.1 or 2.1
I hope you have understood how to imply the trend line and pointing Higher high, lower high and Higher low from this article.
Above all, I would request to make the practice of this trading system try to use H1 and the above chart on an initial basis.
Have nice trading.