Identifying and Trading Intraday Trends.

*How to find basic intraday trends and where I enter trend continuation trades*

Welcome back to the blog. In this post I am going to show you some basic technical analysis techniques that I believe are very important and must be mastered if you are planning on becoming a technical analyst/technical trader of the financial markets.

Trend analysis is a major part of all but one of my trading strategies and therefore it is very much responsible for the success or failure of trade positions that I enter. It is a very basic skill and can be very simple to master if you know what you are doing. In this blog post I am going to show you how to identify the current intraday trend of an asset/security and how I would trade it.

Trend continuation trading is entering trades that follow the current prevailing trend. This is the easiest and, I would say, safest way of trading the financial markets. You are trading with the crowd and there is safety in numbers. Trades with the current trend also tend to have better reward:risk ratios than trades that are against the prevailing trend.

The diagrams below show examples of simple bullish and bearish trends.

Identifying trends.

Here are the 3 main points of analysis I use to identify the current trend.

  1. The swing highs and swing lows of price.
  2. Trendline tool
  3. Exponential Moving Averages (EMA).

Identifying the swing highs and swing lows of price are the simplest and easiest way to find the prevailing trend direction. Clear your chart of all indicators, set price to your desired timeframe and then take a look.

Higher highs and higher lows means the trend is bullish. Lower highs and lower lows means the trend is bearish. If you can’t identify a prevailing trend almost immediately then move on to a different financial instrument because the markets are either in a choppy structure or in a channel.

AUDUSD 1 hour timeframe chart – example bullish trend identification

Once you have found the prevailing trend, drawing a trendline across the bottom of higher lows (for bullish trends) will provide you with an extra confluence for entering new trends. There are multiple ways of drawing trendlines using wick lows, candle closures etc. and there is no right answer for which is best. I have my own preference and you should find your own style through trial and error.

AUDUSD 1 hour timeframe chart – example bullish trendline

The third way I intensify trends in a market is by using moving averages, more specifically I use the 50 Exponential Moving Average (EMA) and the 200 Exponential Moving Average (EMA). Much like drawing trendlines, different traders use different EMA’s but these are the 2 that I like to use.

My general rule of thumb is this; if price is above the 50EMA then it is bullish. If the 50EMA is above the 200EMA then that is an extra confluence that the longer term trend is now bullish also. The opposites apply for a bearish trend.

AUDUSD 1 hour timeframe chart – EMA’s example

IMPORTANT! Trends do reverse and trendlines can break. This is what is called a trend reversal and they can also be traded profitably. I have covered this type of analysis and trading in many previous blog posts. My most recent one can be found via the link below.

Let’s look at some examples of intraday trends in the financial markets.

Example 1 – FX Currencies

GBPJPY 4 hour timeframe chart – bearish trend
  • Lower highs and lower lows.
  • Bearish trendline
  • 50EMA is below 200EMA, price is predominantly below the 50EMA.

In this scenario I would only be looking to enter short positions until the trend reverses.

Example 2 – Stock Index

FTSE100 index 1 hour timeframe chart – bullish trend
  • Higher highs and Higher lows.
  • Bullish trendline
  • 50EMA is above 200EMA, price is predominantly above the 50EMA.

In this scenario I would only be looking to enter long positions until the trend reverses.

Example 3 – Live Trade – GBPUSD FX currency pair.

This example is different because it is a live trade that I have just recently entered. I will provide you with a full breakdown of the trend analysis and trade entry criteria along with potential trade management requirements.

GBPUSD 4 hour timeframe chart – trade analysis.

This is a bearish trend continuation trade. As you can see, I am shorting on the 3rd lower high of a trend and entered at the 1.25 price level which coincided with multiple points of analysis.

There is a bearish trendline which should act as resistance for price to keep it from climbing higher but also in this zone is a bullish trendline from a previous trend. This grenadine has been broken and is now being retested which technically forms part of a trend reversal strategy.

Also in my entry zone at 1.25 is a previous price support zone which should now act as resistance along with the 0.50 fibonacci retracement level and the 4hr 50EMA. As you can see, there are multiple points of analysis to show that price should reverse at this point and continue downwards. As at 4pm this afternoon, this seems to be the case with Cable down 0.75% on the day.

Future price predictions for this trade.

GBPUSD 4 hour timeframe chart – price predictions.

I believe price will continue to sell off from here and make another new lower low on this current trend. I have 2 price targets in mind for this trade depending on the level of momentum that stays in the market, as always the fibonacci extension tool and previous support zones are perfect for finding key levels to remove exposure and lock in returns.

If you are also trading GBPUSD then keep an eye out for 1.22500 and 1.20800 over the next few days and weeks. These are my two price levels of interest.

End note.

As always… start by just keeping things simple. You should start your analysis with a clean chart and slowly build up adding your indicators and technical analysis tools until you have a clear picture about what the price trend is doing and how you can trade it.

In my opinion, trend continuation trades are the best trades. You will likely see your win rate and average reward:risk ratio increase if you begin to focus more on trading with the trend. As I explained earlier, the majority of my personal trading strategies are all designed around trading with the current trend and buyer/seller momentum.

I am currently offering my complete Mastering The Markets – Retail Trading Course for 30% OFF as a special discount for this month only. Please head over to my Trading Education page to check out all of my education packages and the deals available.

Useful Links:

All my technical analysis is done using the TradingView platform. You can get access via the link below.

My preferred broker of choice is IC Markets. Low spreads and trading costs really help long term profitability. A link to their site is below.

FTMO Trader Funding Programme.

Thanks for reading and please don’t forget to LIKE, SHARE and FOLLOW my blog to stay up to date with the latest market analysis and trading education posts.

DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.

6 thoughts on “Identifying and Trading Intraday Trends.

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