Trend Radar Manual
What is Trend?
Price trends in trading refer to the general direction of prices over time. A trend can be upward, downward, or sideways. If prices are generally increasing over time, then the trend is said to be “upward” or “bullish”. Conversely, if prices are generally decreasing over time, then the trend is said to be “downward” or “bearish”. If prices remain relatively stable over time, then the trend is said to be “sideways” or “flat”.
Investors and traders use price trends in trading to identify potential buying and selling opportunities. By recognizing an upward price trend, investors may look for opportunities to buy a security before its price increases even further.
Similarly, by recognizing a downward price trend, investors may look for opportunities to sell a security before its price decreases even further. By understanding how price trends work and how they can be used in trading strategies, you can increase your chances of trading profitably and maximizing long-term returns.
Types of Trend
An uptrend is made up of ascending peaks and troughs, also called higher highs and higher lows.
During uptrends, demand is higher than supply, and price is driven upwards as traders continue to buy the asset at increasingly high price points.
A downtrend is made up of descending peaks and troughs, also called lower highs and lower lows.
During downtrends, supply is higher than demand, as traders sell the asset at increasingly lower prices.
In a sideways trend, price action is range bound, repeatedly rebounding between a high and low zone.
The high zone is called resistance and the lower zone is called support. A sideways trend is a period of consolidation where supply and demand are roughly equal.
What is Trend Analysis?
Traders analyze price trends to identify potential trading opportunities and make informed decisions about when to buy and sell. By looking at how prices have moved in the past, traders hope to gain insight into what prices may do in the future, allowing them to better judge if entering or exiting at a specific time may be profitable.
Price trends can also be used to identify support and resistance levels, which can help traders determine when prices are likely to reverse direction. Analyzing price trends is a key part of any trading strategy, as it helps traders make more informed decisions and maximize their potential profits.
Predicting the Future
The most useful aspect of price trends is that you can use them to help predict figure how what price is likely to do in the future.
“The trend is your friend”, as the old adage goes, and price trends are more likely to continue than to stop or reverse.
After identifying a trend and the generally expected positions of its future highs and lows, you can attempt to “ride” the trend as profitably as possible by buying at lows and selling at highs.
Keeping a Bird’s Eye View
However, there’s a major stumbling block traders encounter when trying to trade trends. They get caught up focusing too closely on a single period price trend, and forget to consider the whole picture.
When you trade based only on one trend, such as the short term trend or long term trend alone, you are essentially trading with blinders on and ignoring the important information available to you.
You need to keep a bird’s eye view of price trends across multiple periods because it helps you get a better understanding of the larger market, and will give you an edge when predicting future price action.
Focusing too closely on one specific price trend period can lead to tunnel vision and cause you to miss crucial nuances in the market that could affect your trades. Having a more holistic view of the chart will enable you to make informed decisions based on the bigger picture, instead of a small subset.
Multi-Period Trend Analysis
Focusing on only one period’s price trend is not a good idea for traders because it fails to take into account the bigger picture. By looking at only one period’s trend, traders are missing out on important information about how the market has moved over time and what might be influencing current price action.
Relying too heavily on a single period can lead to missed opportunities and even losses if that particular trend fails to hold in the long run. A better approach is to look at multiple periods and gain a more comprehensive understanding of price movements before making trading decisions.
Multi-period price trend analysis is an important tool for traders because it provides a more comprehensive insight into the market than focusing on a single period’s trend. By considering multiple periods, you gain a better understanding of the market and develop stronger strategies.
You need to consider the trend across multiple time periods.
Focusing on short-term, medium-term, and long-term trends together will give you a fuller picture of the market’s direction and potential future moves. This allows you to better identify entry and exit points, as well as potential opportunities for profit.
It also helps you manage risk more effectively understanding how changes in one period may affect other periods. By comparing and contrasting past trends, you can also identify patterns between their interaction which signal probable bullish or bearish future movements.
The key takeaway is that trend across multiple time periods need to be considered simultaneously – it is best to take a holistic approach to your trend analysis.
Considering the short, medium, and long term trends is crucial, because each time period offers different insights into the market.
Short-term trends can reveal emerging patterns and provide an immediate outlook on what to expect in the near future.
Medium-term trends provide a broader picture of where the market is going, giving traders insight into potential opportunities and risks.
Long-term trends show the overall direction of the market, helping traders make decisions about their overall investment strategies.
By looking at all three time frames together, you will get a comprehensive picture of the chart and make informed decisions based on diverse, all-encompassing information.
Our Top 3 Trend Patterns
By comparing and contrasting price trends across these three trend periods (the short, medium, and long term), you can identify trading patterns and classic signs of trend reversals and continuations. These patterns can give you insight into what the market will do next.
There are a few classic and easily recognized trend patterns that every trader should be aware of.
The ‘Extended Run’ trading pattern is one of the most powerful and reliable patterns out there for savvy traders. It occurs when all three periods (short, medium and long-term) are moving in the same direction – either up or down.
This can be an incredibly profitable situation for traders, as it means that price is likely to continue in the same direction for an extended period of time. It’s not unusual to see prices move 10%, 20%, or even higher before eventually correcting themselves.
However, this pattern is too perfect to last forever. Eventually there will be a pullback, so it’s important for traders to be patient and wait for it before entering into a position. This is because once the pullback hits, prices are likely to correct themselves back toward more normal levels.
A Healthy Pullback is a trading pattern that occurs when the medium and long-term trends are in alignment, but the short-term trend temporarily moves in the opposite direction. This pattern presents a great opportunity for traders to enter the market, as it suggests that the overall trend will soon continue in its original direction.
The key to this pattern is that it must be a ‘healthy’ pullback – not too deep, not too shallow – before entering into a trade. It should also have good support and volume behind it; otherwise, the pullback might be an indication of something more serious. Traders should look for clues such as increased volume or stronger support levels. Once these indicators suggest that the pullback is healthy, it’s time to enter into a trade with confidence.
This pattern can be used in any market, from stocks to commodities to currencies. However, it’s important to remember that no trading strategy is without risk and caution should always be exercised when entering any kind of trade.
The ‘Fading Power’ trading pattern is characterized by short and medium term trends that are in opposition to the long term trend. It suggests that the long term trend may be weakening, and could potentially reverse course.
The ‘Fading Power’ trading pattern is often a warning sign for traders as it indicates that there could be a shift in the market direction. By recognizing this pattern early on, traders can take advantage of potential profit opportunities as well as protect their portfolios against potential losses. In order to identify this trading pattern, traders need to pay close attention to the different timeframes of their chosen asset.
If the short and medium term trends are moving in an opposing direction to the long term trend, then this could represent a ‘Fading Power’ signal. At this point, traders should consider their options carefully before making any decisions regarding their positions.
How to Identify Trend Patterns
Identifying trend patterns is an important and challenging task for traders. It requires the use of multiple moving averages and indicators, and the tedious process of organizing them. Moving averages are a type of indicator that shows the average price of an asset over a certain period of time. By combining several moving averages, traders can better identify longer-term trends in the market, which can be used to make decisions about when to buy and sell.
Indicators are mathematical calculations that measure short-term momentum and volatility in the market. By using multiple indicators at once, traders can have a more comprehensive view of what’s happening in the market, allowing them to make better trading decisions. The process of combining several moving averages and indicators into one chart can be tedious, as it requires careful analysis and attention to detail. If done properly, however, it can be incredibly helpful in identifying trend patterns and making successful trades.
Trend Radar makes the process easy.
The Trend Radar is an innovative, heatmap-like indicator that will do the trend analysis for you.
How it Works
Trend Radar displays current price trend across five different time periods – from very short to very long – in the rows of a heatmap. The rows are ordered top-to-bottom, from short term to long term trend.
It works by calculating five Exponential Moving Averages (EMAs) of different lengths, from short-term to long-term, and displaying them in a “heatmap” like display. When the current price is above a period’s EMA, a green cell is plotted; when it is below, a red cell is plotted.
This allows traders to easily monitor the trend across multiple periods, from short term to medium term and long term. Additionally, Trend Radar has customizable lookback periods so traders can tailor their analysis to their particular goals and strategies.
Understanding the Heatmap
Each row depicts the trend direction in terms of up or down trends.
Rows are arranged top-to-bottom, from shortest to longest term trend.
Green or red dots on the bottom row indicate extreme trend strength.
Trend patterns can be identified by comparing and contrasting the latest trend cells across the different time periods.
Trading Trend Patterns
By using the heatmap to quickly compare trend across the three time periods, you can spot some useful trend patterns that will help you spot entry and exit opportunities.
The extended run pattern, which occurs when all three trend periods (short, medium and long-term) are moving in the same direction, is very easy to spot with Trend Radar.
When the radar is green across all periods, we have an extended bullish run. When it is red across all periods, there is an extended bearish run.
It’s generally considered imprudent to enter during this pattern, because you will be entering ‘late to the trend’ and chasing the price action. Instead, this pattern is usually a good sign that you should wait for a healthy pullback to enter in the direction of the trend, or a fading power pattern for an opportunity to trade against it.
The healthy pullback pattern occurs when the medium and long-term trends are in alignment, but the short-term trend temporarily moves in the opposite direction.
It is visualized on the Trend Radar as a small ‘dip’ against the prevailing direction which only extends two or three rows into the radar. This coloring in the radar is a representation of a minor, short term consolidation in the medium and long term trend.
Generally, price will recover from these minor consolidations, and continue to move in the original trend direction – making these healthy pullbacks excellent times to take advantage of discounted prices.
Once a break in the trend alignment extends into the medium and long term trend (the third and fourth rows from the top), however, the effects are usually more fatal for the long term trend. Such drastic dips are considered a sign of fading power in the long term trend.
If your position is in the direction of the long term trend, then the fading power pattern is kind of like a healthy pullback gone wrong.
It occurs when the short and medium term trend gradually begin to contradict the long term, without rebounding back to their original direction like in the case of a healthy pullback.
This pattern is characterized in Trend Radar as a gradual changing of color in the short and medium term trend periods against the direction of the long term.
Settings and Parameters
Trend Radar comes with settings to change the lookback periods of its moving averages, so that you can adjust its sensitivity to short, medium or long-term trends. By changing the lookback period, you can change how much data is taken into account when determining the different periods’ trend.
By adjusting the lookback periods, you can easily customize Trend Radar to fit your needs and stay up-to-date with market trends regardless of what timeframe or chart you are viewing.