Trend Trading For Dummies by Barry Burns

Author:Barry Burns
Language: eng
Format: epub
ISBN: 9781118871409
Publisher: Wiley
Published: 2014-08-01T18:19:29+00:00

I like to trade in the direction of the trend when I can get early into a new trend. I consider early to mean the first two retraces (wave lows in an uptrend or wave highs in a downtrend). A retrace in a trend is a small (in price range) and short-term (in time duration) price move against the direction of the trend. Buying a retrace of price down against the trend potentially allows you to enter at a lower price, as opposed to buying as price is moving up, thus allowing you to adhere to the adage “buy low, sell high.”

Figure 14-5 illustrates a first retrace in the trend as evidenced by %D of the stochastic indicator (which I use as my cycle indicator) getting below the value of 55 for the first time after the 50 SMA turned up.

Figure by Barry Burns

Figure 14-5: The first retrace in a trend as shown by the cycle indicator.

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