How to Differentiate Between Trend & Counter-trend
The Yen pairs are influential for sure in analyzing the overall currency market. By acknowledging that the behavior in one pair influences price action in another is called parallel analysis, and it lends itself well to Dow Theory, which states that what happens in one index must be confirmed by a second index for a price move to be sustained. I will take it a step further by saying that for a price move to be able to extend itself it needs both the daily and weekly trends pointing in the same direction. Therefore if we are following related markets such as GBPJPY and EURJPY we need both the Daily and Weekly Trends for both these pairs to be pointed inthe same direction to see sustained moves.
I’ve highlighted three of the yen pairs on our Trend Map below and we can see that as of this morning we had divergence between the Daily and Weekly trends.
And has it happened we also saw sharp corrections today in all the markets as higher prices were rejected across the board, and these three pairs maintained their current pattern on the daily charts of lower highs over the past month.
My conclusion: we are still in countertrending price mode for the yen pairs, which is influencing– curtailing rallies – in the majors.
Jay Norris www.trading-u.com
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Very good analysis tool. Well done !
Is that tool or one like it available on-line anywhere? I’ve yet to discover something like that that updates in real time.
Yes having a trend map is essential for control and grounding. I have a less sophisticated one as a spreadsheet, but the thinking is still in the same vain. Seeing it visually like this really contributes staying on the right side of the market. At least to know where we are, i.e. Counter trending mode certainly keeps a trader in control of his position and stance. I will repeat bob’s words indeed “Very good analysis tool”. Good to know a bit of the Dow Theory also! There is a saying that “Ignorance is bliss” – and we as traders do NOT want to be Ignorant or it will cost us bucks!!
(Ascot, UK)
Hi Spacen,
We’re about done beta testing it…
Go ahead and sign up for the freebies on the site, under “Member Login” –lower right on the homepage — http://www.trading-u.com — and we’ll let you know when that tool is available for the public. We’ll have it on a secure page on the site for a very modest price. We’re very close to getting everything web-based, and secure.
Thank You for asking!
Hi,
Indeed it’s a nice indicator you got there
But for you the weekly trend is still down ? What do you use to see you trends ? cause it depends on the indicator you use
And it can leads to false signals i thinks
Thanks
Thanks Seb…That weekly can change quicker than most people think. You don’ t have to wait for Friday’s close to make a decision on a lower time frame based on price behavior at a level that defines weekly direction
Thanks Mario!