 Hi in this video, I'm gonna be talking about and showing you everything to do with Trending markets so identifying a trend why traders Prefer to trade a trending market how to draw a trend on a candlestick chart Everything to do with trending market environments now. There were two market states you've got a Market that moves, you know, basically higher It moves lower or It's going to move sideways All right, so that's three. Sorry. Well, two meaning these these would be what would be considered trending market state So up and down pretty much is a trending market state or sideways, which is a ranging market state So, you know, there's a there's two market states that traders really will look to trade so with a with a trending market Prices will even move higher or they will steadily move lower and the reason why trending markets are so popular with Traders is because that's pretty much where the money is made if you think about a market that moves sideways And you buy let's say you buy here If you're buying at this price point and market and the market keeps moving sideways, then how are you going to make? any Any profit, you're not whereas if you're you know buying here and The market moves higher then obviously your as price goes higher Your profit goes up and that's the reason why trending markets are considered basically by traders to be the best market state and market environment to make the most money so The downside to trending markets if you can call it a downside is that markets don't trend a Lot of time in fact Markets will be in a range probably 60 to 70 percent of the time Which means that markets trend probably 30 to 40 percent of the time so trying to find the trend isn't you know Isn't as easy as it seems and when we get on to How to identify and classify a trend? You'll see sometimes how difficult and subjective it can be so Let's get rid of some of this stuff Right So markets When we're trying to identify a trend what happens is is that markets don't move up forever, right? So you might see a move That goes higher. That is not a trending market Trending market technically on a price chart is defined by Certain rules so the rules are that What you'd want to see is a Low or what you would consider a low? You'd want to see a move up, right? And this may be you know what you would consider a high prices will then Pull back now This is due to buyers and Really sellers so if you think about The market is basically run by buyers and sellers is supply and demand So when there's more demand then supply prices will move higher. There's more supply and demand prices will move lower and buyers pretty much represent Demand so there is a lot of demand in the market Right, there's more demand. There's more buyers than sellers in the market, which basically pushes the market higher All right, then at some point As we know the market doesn't move up forever at some point buyers will stop buying and Demand will become less because You know the sellers will now take over the market, right? So when there's more supply then demand Prices will then fall now the buyers demand Looking for an area with which to try and take control of the market again. So this move Here right is usually referred to as you know a pullback or it could be referred to as a retracement. There are some other Terms as well, but the most popular and most common Terms for when prices You know, basically after a move up and they you know come down is what people would refer to as a pullback or a Retracement, right? So prices are retracing Which means that the sellers are probably in control Supply there's more supply than demand and then the buyers, right? So demand looks to buy again, right? They look to buy again At some point now, we don't know where prices will you know retrace from? But once we see prices then start to make a move higher Right and take out This high because we're trying to identify a trending market. So We don't know whether prices are trending prices will pull back. So the first thing is a load to a high Then we have a retracement, right? That's the that's the second step and the third step is for price to Basically go above the high Yeah, and So that becomes a what we would call a higher high right because this high is higher than this high and once prices break through and Make a new high Right. So the higher becomes higher than this high This retracement point here is Now defined as a higher Low because we have a low and we have a higher low Right this low is higher than this low. So We'll go over that again prices move up prices pullback or retrace This is not a trend. We don't identify this as a trend Right, so that would be the high and that would be the low As soon as prices break above This high and when I say break above so it has to basically just go above that level there Technically that is defined as a higher high and as soon as we identify a higher high this now is defined as a higher Low if prices do not go above this high here Then we cannot consider this to be a higher high and we cannot consider this to be a Higher low. So let's say for example prices did not make a new high and they basically, you know went as high as here We this is not a trend This is not a trending environment because what we could have is prices go up come down and then You know enter a range or even a downtrend, which I'll get into in a sec But we cannot define prices or the market as being in a trend until This move has happened. All right, so we got move up move down move up So if you were looking at You know, maybe identifying this via numbers, you know, this may be your high may be the first move This is the second move and then this is Third move Yeah, so we want to see this pattern within the market before we consider the market to be in And I mean, I know I've been saying that it's in a trending market, but a potential trend whenever we talk about Any concept in trading it's usually or it should be taken as A potential because we're always dealing in probabilities in the market All right, so the probabilities of the market being in a defined trend is higher When we have a higher high being made and we see this price pattern this one to three move Doesn't mean that we definitely are in a trend and it doesn't mean that you know You should definitely start, you know trading the trend because as you'll see and I'll show you later the market Can It does it does things that will make you think that you're in a trend and you're not so we're dealing with probabilities here The probability of you being in a trend is Is high and this is how trends are defined? Yes, but it doesn't mean that we are a hundred percent in a trend so we've just looked at a Trending market when it trends higher, right? So we've got the first sign of a trend is when it makes higher highs and higher lows now in a downtrending market In a downtrending market We want to see the opposite. So we want to see Lower highs and lower lows. So what is a lower high and lower low? Same principles apply, but we're just it's just in reverse. So We want to see a high We want to see a low, right? So this is not a trend We see a retracement. So this would be our first move Move number one Then we want to see a trace a retracement or a pullback And this would be considered move number two Now until prices break below Or make any new low Right, so if prices Make a new low This would be considered. I just drew it to extend a lower Low, all right. So a lower low Obviously is lower than this low once prices make a lower low and once prices Go below and make basically make a new low then this Is now considered a lower high, right? So we've got a high We've got a lower high. We've got a low. We've got a lower low now We are potentially in a A downtrending market. So the probabilities are in our favor that this is going to continue To the downside, right and the market basically moves in waves And you'll start to see and we'll we'll go over why markets move in waves as well so we will basically identify a A downtrend with a High a low a retracement a New lower low is made. So this is move number three And once we make a new lower low Then we can define that this is the lower high and again It's the same concept because if prices do something like this, but they don't make a New low Then we cannot consider this to be a lower High that is not a lower high until prices Break through and make a new low. So a lower Low because that was the previous low. We look to the left and we see that prices have made a lower low So this is now the lower high as this was the high so When we're on alert And we're trying to identify trends. This is the beginning stages the absolute beginning stages of a Downtrend and obviously with higher lows and higher highs being made we go on alert when If we're looking for an uptrend. So once we identify a Trending market or potential trending market environment How do we capitalize from this? All right, so let's clear the chart How do we capitalize and how do traders try to jump on and capitalized from the trend now we go back to a An uptrending market environment, right? So we've got our high our lower high and Our higher high so once This pattern has been established How can we and how can traders? take advantage of this This move so what traders will do is They will wait for another retracement. Remember we had a retracement here and That was our first retracement. So what you're gonna do now is wait for and what traders will do is wait for a second Retracement, right? So they wait for a second retracement now the best place for traders to get in and start buying would be an area of Potential activity and if you've watched our video my video on Support support and resistance you will understand that support becomes resistance and resistance becomes support now when prices moved up to this level here and made this new high and Was rejected and supply took over This became a potential level of Resistance, right? So we weren't sure whether prices were going to You know react at this level here and It didn't react maybe the way that we wanted to react and prices went through right so what happens is is aggressive traders will look at this level and they will project into the future and The rule is that resistance becomes support. So this is potential resistance and then they will look to enter and look to the past and see if that level was a level of Activity so you might have had a level where here was a Level of resistance All right, because the more times this level has been Used in the past Traders will have their eye on that level. So if that was the first touch That was the second touch that might have been obviously a confirmed level of resistance Prices didn't hold now the aggressive trader Again, we're dealing with probabilities here May want to enter and take a you know a position a Biposition here right to take advantage of the trend hoping that it's going to move higher All right, so there's a conservative approach as well where traders will wait for price to come down They won't buy here they may look for prices to retest and Confirm this level as being a level of support because we don't know that this is going to be support again We're dealing with probabilities. So we want to see prices Come down here again For the conservative trader and then prices Move higher before traders decide to buy so Support becomes resistance and resistance becomes support This is what we refer to and traders refer to as market structure. So the structure of the market Is being held right? so This is how traders take advantage of a potential trend, right? So let's get rid of this again and I'll go over it. Let's go over one more time, right? So this would have been a higher high now When prices pull back You want to look to see a level that has been historically tested or used as support or resistance and then Look to buy at That level hoping in the hope that the market will continue trending Higher, all right. So this being the higher high And now this being a new high. So that's now becomes the higher high This now gets defined this level here and this retracement level gets defined as a sorry higher Low, sorry, this is not a lower high. This is a higher low and then We want to see prices retrace back into where a Level of potential Resistance, which is the previous higher high and then we look for prices to go higher Retracement into the previous level Which was a higher high and prices stair step their way up so in effect what you're seeing is the market do something like this and the market moving in waves and Basically obeying the laws of market potential market structure, right? So look at it as kind of like, you know scaffolding if you know what scaffolding is It's just support becomes resistance and resistance becomes support And we'll look at this in a downtrend. So prices move higher prices retrace Prices move higher prices retrace back into where a previous Level which is a previous high which acted as resistance When prices broke through We look To the left of the chart Historically and see if this level had been used as a level of resistance with price had been rejected If it had then aggressive traders will look to enter at this level here aggressive traders look to enter on the first touch Conservative traders will wait for the level to be touched a second time and With prices move higher then they will look to enter long So that's how traders will take advantage of a trend now trends aren't perfect. So Let's go back a bit So when we talk about, you know, the market making higher highs and higher lows The market could do something like this What the market doesn't necessarily have to make a new high after You know making a higher and a retracement. We could see the market do something like this and Then go higher. We are still stair-stepping our way up and we are still in a trend So I'll do it from the from the downside Right. So in a downtrend What you want to see is prices From a high from an identified high to a low Prices pull back prices make a new low or a lower low Now this becomes the lower higher and Then what traders will do is wait for a retracement into a level So they will look to see where the lowest or the previous low This was a potential area of support and we know that support potentially becomes Resistance. So the aggressive trader Will look to enter in the hopes of if this is a strong trend to the downside That prices will continue lower conservative traders May not trust this move and wait for confirmation of this level and wait for prices to start moving lower before they enter So we're waiting for lower highs and lower lows again once prices break past this level Then this becomes a lower high And this would be the confirmed Lower low if we don't if prices don't continue to make new lows and lower lows Then this cannot be considered a lower high. So in a downtrend It's all about looking for the structure and structures of the market potential support levels now turning to potential resistance So what we're going to do is we're going to look at examples of these on a candlestick chart So this is the candlestick chart of the us dollar swiss frank pay on a daily time frame chart Now when we are drawing trends looking for a downtrend In a perfect world, we would want to see You know something like this Prices stair stepping down Like that, right? Like what I previously drew. It's not the best But what I previously drew on the whiteboard now in real life Prices don't always work like that. In fact, it's it's a rarity But the concept is still the same So is the market making lower highs and lower lows or is it making higher lows and higher highs? And in this example, we can see prices make a new low They retrace They make a low It retraces Makes a low price of traces And makes a new low Now The same thing would obviously happen in an uptrend You won't get the perfect uptrend So you won't get something that pulls back and then you might get a move like that obviously, but as we Stare step our way up Will prices always come back into a level of previous Resistance and now turn support no And this is what makes trading Trends a bit difficult and if everybody was doing the same thing everybody would be making money and we know that 90% of people Or traders that attempt to trade don't make money in the market. So But again, the principle is the same So if you can spot that the market is making lower highs and lower lows Then you know, you're in a trending environment It's a different question when you're talking about actually trying to enter on You know a in a trend, right? So textbooks would show us and let's clear this and Also, I want to get into probably trend changes as well. So if we were looking to Enter, right? So we would have that would be our low then we would have some sort of retracement so now We would have This level would be our absolute Low, right? So until prices make a new low, which they did on this candle Now we would be looking for Some sort of retracement to back into What would be considered if this will support it be considered resistance now if you watched our My video on support and resistance, you know that support and resistance is drawn as a zone, right so This would have been zone and once prices broke through Came back up into the zone. You can now see Where trade is actually entered to the short side Right, so but you wouldn't be able to spot that necessarily It wouldn't be as obvious to Brand new traders, right like yourselves watching this video This is why trend trading can be Quite difficult and quite subjective there are rules involved in the rules do work But they're not as obvious as you know me just saying, okay, you know lower highs lower lows and then You know, you're waiting for a clear Move back up into the devil. Yes now that I've pointed that out Because when before I did was I did this was the move here Here and then that would have been clear for everybody to see so If we were then looking at levels to get short You can see that prices did come up into the zone did react and it actually did sell off right so Technically we still do have Another selling opportunity here because we did Go lower But we didn't the trend didn't follow through as we would have liked at that same You know at that same point now this leads me on to the point of Trend changes, right now a trend change Let me just clear everything off this so now a trend change if we are making lower lows and textbook lower lows and lower highs, right now if you've identified this level to be the lower high and This level to be a level of structure Prices Can go past this level, but until they break The lower high Until they break past this level This could just be a very deep retracement Because prices again, I think I explained it before that prices could come up into this level here All right not make not break above this level and then maybe Go down trends are never perfect in the market in the candlestick market and you'll see With some future examples why that is But know that just because we have You know basically broken above what is considered a support and where traders would necessarily try and buy They try and I'm sorry I should say sell in this area aggressive traders would try and sell in this area in the hope that prices Will move down remember we're dealing with probabilities We don't know that the trend will follow through sometimes it does sometimes it doesn't again. This is a probabilities game, so The aggressive trader may have lost the trade depending on where they've put their stop loss And if the market moves higher Why the market can move higher and then continue to go down does that mean that we've we've we're ending on an uptrend? We're not ending on an uptrend We've just basically had a deeper retracement or a deeper pullback and then the prices Still continue to move Lower right because you're looking at this from the right hand side of the screen We have no idea what is going to happen in the future All right, but what we do know is that if this is an identified lower high If prices do not break above this lower high Then we are still in a considered downtrend If prices do break above This high and let me just get rid of This if prices do break above this high or this lower high then We may consider The trend to have changed Because now this level has been violated the actual Down move so this move here where you've got the high below The lower high and the lower low now. We don't know what this is. We have no idea What to call this? Level here, so because we don't know what to call this price action this move to this high here Now we consider the downtrend as being over. It's over until proven Otherwise in the same thing would apply to a rising market. So Say for example, we have All right, low Right, and then if prices Come down here because this would be what we'd consider the higher low This would be considered the higher low if prices then Violate this area here The higher low area then the uptrend potentially and Most likely is off until proven otherwise because we don't know what price is going to do here So price could do something like this and Then actually enter a downtrend So When we're looking at and let's go back to the chart when we are looking at trends Right while they're not perfect on the candlestick chart Until prices would have broken above an identified and obvious level Swing level we wouldn't know whether Well, we consider this to be in a downtrend and again, it's very Trading could be subjective to you. So if I was to go back to this example Right this example may have been considered a swing here. All right, so we had a low Prices were traced back up prices came back down right now Here if this is your considered level and that is what you would consider your lower high Prices came back up in prices came back down and then once price broke above here You may consider this now to be the trend to be over. That's it trend is over We don't know because now we've made a low high and Now we're potentially making new highs and We could be entering a new trend. This is why trending markets are very Subjective to the trader and why trading trends can be quite difficult But what I would say is look for the obvious Swings so look for where price is obvious. Yes, you will have minor levels inside of Major levels, but look for the obvious structures All right, don't look for maybe the more detailed structures look for the ones that everybody is looking at This is an obvious high or lower high. This is an obvious lower low. So until prices break an obvious Level then we are still in a downtrend the more experienced you get In trading is the more you'll be able to spot these little you know, the intricacies of these I Suppose these are more detailed lower highs and lower lows and higher lows and higher highs But for now what you want to do is stick to the obvious levels and the obvious swings right and so If we were looking at that This would be, you know, the obvious move low lower high low retracement Back down in coming back and then back in right so a trend change is Really when prices will break above or what you consider price to break above an Obvious level does that mean that the prices if prices do come up here and then they can't continue going Lower again and make new lows. No again. We're always dealing with probabilities And the probabilities within the market, but you just want to be on alert of a potential trade change in the trend if you are trend Trading it's a bit of a tongue-twister there So let's look at another example and find some more examples in the market of potential uptrend So in this example on the Australian dollar US dollar 4-hour chart 240 minute chart, we can see that prices have been making Basically been trending, you know higher right So now what you want to do as a trend trader is look to identify where the higher highs and higher lows are So as I'm drawing these matter of fact I'll explain exactly what I'm doing. So you'll see prices Make a new high Come down now. We don't know that this is a potential trend Until prices break above that area right there soon as prices break above now this becomes the New high or the higher high And once we define a higher higher we have to define a higher low So this would be the higher low now what trend traders and then doing is They're looking for areas with which to get in on the upside. So if we zoom in Zoom in a bit, right? So as you can see prices do come back down into What would be considered that was the previous high and let's just do this as the low So prices did come down in to This area here, and then you had retracement the retracement come down in and then prices You know came in the aggressive trader may have bought there the conservative trader ended up buying here and then prices moved to the upside now we didn't get a New high until here Right. So if this was our Higher low and our defined higher low, then we went into a sideways market And this wouldn't have been considered a higher low And why wouldn't it has been considered a higher low a Higher low and this is because prices did not make a new high Right. So prices did not Break above this level will go above this higher higher. So we cannot consider this to be a higher low. So This now becomes a higher low because we know that this was Higher than this low and Then once prices make a new high and prices break above and this becomes now the higher high and Just as a note the higher high is usually always moving until it makes a retracement So soon as price broke above here and prices spiked above that's a high That's a high that's a high and then you know new highs are being made and then you can see as prices do come back down into this zone You've got the aggressive traders that tried to try to get in a bit early Prices did react and prices came, you know down, but now if this is our Identified higher low from This move here. So now we've got higher low and then We have that level there. So let's get rid of here. So now we're still in a trend until This higher low is broken So prices do come back Into This level here with prices did come back into this level here and maybe broke below it or spike below it Then we would consider The trend to be over right does that mean that we're not gonna You know buy around this level if we're looking to be a buyer, then we would still buy here All right, it just means that we're entering more of a ranging market state and what we consider like I said Trend trading we may not want to look we want to make look to another market which has a clear a defined trend So until prices break this higher low We don't consider ourselves what we consider ourselves in a trend and if prices did spike below our defined higher low level then we may want to Adjust our view on whether the market is in a uptrend as we can see prices Sorry Prices Once prices broke above then we considered Us to be in a trend or the market to still be in a trending environment and Prices you can see there's a bit of a shallow pullback here and then prices break above. So now this becomes the higher low And that would have been probably be higher high So we get a move From here all the way up and in fact once that break broke and became a new high This level here down here would become the higher low Right, so we've got higher Low, I hope you follow me on that one, right? So As soon as a new higher high is made this becomes a higher low prices broke down with traced Prices made a new high Once a new high is made This now becomes a higher low and then we wait for prices To make the higher high and then retrace so we want to see an obvious retracement, right? So we're still in a trend. We're still in a trend. This is our defined higher low so until prices Breakdown and go below this area here. We're still considered to be in an uptrend Prices came down prices went sideways for a bit and until prices now go above this level We can't this is going to be our higher low until we make a new high once price is made a new high this now becomes our Higher low So that's higher low. Let's get rid of those So that's our higher low. This is our higher high and then if traders were looking to capitalise from this area, you can see that prices do come down into this previous Resistance resistance resistance now turns to support you can start to see traders look to buy in this area prices go higher right, so I hope You you weren't too confused and it's clear But the market is never a hundred percent clear you will never You know seed prices Create the perfect higher high and higher low for too long You know you get one or two moves, but as you can see in real life You know prices will spike below levels And they will go into ranging markets and then possibly go into down trending markets, but when your plotting levels and higher highs and higher lows or lower highs and lower lows just understand that the market is not perfect and that as long as you stick to the obvious levels and the principles of Trend trading you should be okay when following the trend. Will you capitalize on every move? Chances are not you know, you won't but as long as you do follow, you know My examples and you know get your eye in for it practice Back test go through your charts see where levels have been violated See where the trend has possibly gone into a ranging market or potentially even into a down trending market at the opposite way And it's something that you need to practice a lot Before you start to see Certain patterns start to emerge and areas of where you may want to try and take advantage of The trend and where you shouldn't be taking advantage of the trend But the higher high higher low principle and the lower light lower high and lower low principle is the same Just follow the the principles when you're trend trading hopefully that helps and If you do have any questions Just email me my name Leon row on info at trading 180.com