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Tracking the Trend and Trading Strategies
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Trend identification
If observed, we may perceive that within an existing upward or downward trend, there are price fluctuations that sometimes seem to be in line with the trend, additionally sometimes seem randomly formed. However, even these seemingly random formations are actually under the influence of the prevailing trend, and they are using the derivatives of the trend in some way.
Parallel Formation
The use of the parallel lines drawn is quite simple. Also these lines can be considered as the levels at which supply and demand change, reversing the current fluctuation in prices at that moment. In this form, each parallel line acts as support and resistance, which shows us the buy and sell levels.
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Trend Within Trend
As we clearly observe in the above figure, a secondary trend emerged towards the end of the uptrend, significantly impacting the price.
Residue of Past Parallels in Technical Analysis
In the above figure, after the formation of the Ave B bottoms and the combination of these points, you can see on the left side, the parallels that we searched for.
Violations in Parallels
The figure portrays a clear upward trend confirmed at nearly every point, illustrating it with straight lines. It’s important to note an unusual formation at point A, which deviates from the typical pattern.
However, what is important here is whether this unusual sagging can form a new trend. Normally, the answer to this should be “no”.
However, if you have drawn a trend line in which such a violation exists, instead of ignoring or completely forgetting this violation, it is an important step in graphical analysis to draw a separate trend line with dashed lines to indicate the violation.
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