TRENDS
When I’m setting up price clusters in the market, as far as trade entries
are concerned, I want to focus on the clusters that set up in the direction
of the trend on the chart we are analyzing. These will be the higherprobability
setups. The simple definition of a trend that I use is one
that involves looking at the pattern on the chart. Are we looking at
an uptrend, with a general pattern of higher highs and higher lows, or
are we looking at a downtrend, with a general pattern of lower lows and
lower highs?
I believe in going with the flow rather than attempting to swim
upstream, as many traders do with countertrend trades. If I’m looking
at a bullish chart pattern (higher highs and higher lows), I set up my
clusters for possible entries on the buy side, in keeping with the trend.
If I’m looking at a bearish chart pattern (lower lows and lower highs),
I look at the clusters for entries on the sell side to help me enter in
the direction of the downtrend. I look for the clusters that show up
“counter” to the trend in order to help manage profits and exit strategies.
For example, if we are long and we are seeing a resistance cluster within
an uptrend, I will suggest that my traders tighten up stops and/or take
partial profits.
Aprice cluster that is counter to the immediate trend is still considered
a trade setup, although you need to be aware that the odds that one of these
clusters will turn into a winning trade are lower than those on
the clusters that are not fighting the trend. Using proper trade filters and
triggers when these countertrend setups develop will improve your odds
in this case.