How to Identify Market Trends | Bullish, Bearish or Change in Structure
Cryptocurrencies are a trending market: when they intercept a trend they usually continue to go in that direction and this is why it is so important to know how to identify if the trend is bullish or bearish or if it is about to change direction.
Identify the uptrend
To identify a trend it is always best to start with the higher timeframes because no matter what happens on the lower timeframe, it will end up going in the direction of the higher timeframe. This means you can use the low timeframe price action to execute your high timeframe setup.
The best timeframe is 1Day and weekly chart.
Now let's take a look at what the uptrend looks like
When the trend is up, you will see that the price is continuously creating higher highs and higher lows. This is an indication that the trend is up.
Here is a concrete example of this trend.
Look at the chart above. The price has not broken any of the lows and this is your confirmation that the uptrend is still intact and you can continue to be bullish on it.
Where can you list your business?
No straight line rises. Lower time frames will give you pullbacks while higher time frames will consolidate. For example, look at the chart below
It looks like the higher time frame is simply consolidating, but in reality it is a 32% price decline, which can be observed using the lower time frame charts.
When the price drops into a key area of the high time frame (previous higher low), that area can provide an entry trigger and the target will be new highs.
Identify the bearish trend
Like the uptrend but in the opposite way
When the price makes lower highs and lower lows, it indicates that the trend is bearish.
Here is the live example.
Where can you list your business?
If you are interested in shorting the market when it is bearish. The method is the same as trading in the bull market. When the lower timeframe gives you a bounce in the lower high zone of the higher timeframe. You can look for a short trigger there and the target will be new lows.
Identify the trend change
No trend lasts forever and it is in these trends that people lose most of their money.
If people are bearish and the trend changes direction, they don't accept it and continue to short the market.
And if people are optimistic and the trend changes, they don't accept it and continue to buy during the dips.
How can you recognize a change in trend?
It's quite simple, you can use the same trend strategy you were using to identify uptrends and downtrends.
When the uptrend breaks
when the market breaks out of an uptrend you will see it break below the higher low. Once the price does this you can shift your bias away from being bullish and wait unless you get another bullish confirmation.
Some people prefer to take profits on their purchases when a trend break occurs, while others prefer to open short positions, depending on the type of trader they are and how they want to trade.
Here is the live example when the price dropped below the highest low
When the downtrend breaks
Similarly, when the price breaks out of the lower highs, it means that the trend is changing from bearish to bullish.
Here is the example of the live chart
This is exactly how different market trends can be identified.
Be bullish when the trend is up and bearish when the trend is down.
Change your attitude when the tide changes.
This is the only way to survive and be a profitable trader.
Thanks for making it this far. I hope you learned something from this article. Your feedback will be appreciated #BinanceBlog #Trend #Trending
