In this episode of Truth About FX, Walter spill the beans on the million dollar question: how do you know when a trend ends? And what should you do? According to him, you never really know. BUT, you can follow the retracement. He lets out some key point on how to spot a good retracement candle. And did you know there are two ways to spot a possible trend end.

Hugh also makes some points on fear of personality and how this is an important key on understanding your own trading judgement.

Download (Duration: 07:34/ 9.1 MB)

In This Episode:

00:33 – Million Dollar question

01:53 – absolute worst part

03:48 – draw a trendline

04:43 – focus on low-volatility trend

05:47 – a little bit picky

06:56 – try and trick yourself

Tweetables:

You’ll never know when it’s over [Click To Tweet].

Focus on the little volatility  [Click To Tweet].

Trade at the end of a retracement [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hi, Walter. How do I know when the trend is over? The Million Dollar question, right?

Walter: Right, awesome. You do not know. Really, it is tricky because one thing I’ve learned from Martin Pring — there’s a book called “Pring on Price Action”. There is another one called — I’ll put it in the show notes. Basically, he talks about how, at the end — Technical Analysis ExplainedA/a> that is the other one I know. Martin Pring on “Price Pattern” and “Technical Analysis Explained,” one thing that is interesting about the way that he talks about retracement is that you actually have this weird thing where, at the end of a retracement —let’s say the market is going up.

You’re trading the Pound against the Dollar. It’s going up, up, up and then it retraces. Often, the very last candle, the very last bit of that counter trend retracement is the strongest one in the countertrend direction.

Now, if you think about it, that makes it really hard to find at the end of the trend. If you believe this, go back and test, see for yourself if this is true but it often is. What that means is you are going to be most likely to think the trend is over at the absolute worst spot because it’s just the end of the retracement and the trend is going to re-engage now.

It’s awful. I mean, it’s like everything in trending were totally built to go 180 the wrong way but this is important to know. If you know this and you see this, then you should pay attention.

When you see a really strong candle at the end of a retracement move, pay attention because that could be the end of the retracement. It doesn’t mean it’s always this. This is what I will recommend if you are looking for the end of the trend.

There’s two ways to do these. The good news is if you are getting into a trend at the end of a retracemen...