Signs of Strength in a Trend
There are many characteristics of strong trends. The most obvious one is that they run from one corner of your chart to the diagonally opposite corner with only small pullbacks. However, in the early stages of a trend, there are signs that indicate that the move is strong and likely to last. The more of these signs that are present, the more you should focus on with-trend entries. You should start to look at countertrend setups only as great with-trend setups, with you entering on a stop exactly where those countertrend traders will be forced to exit with a loss.
One interesting phenomenon in trend days is that on many of the days, the best reversal bars and the biggest trend bars tend to be countertrend, trapping traders into the wrong direction. Also, the lack of great with-trend signal bars makes traders question their entries, forcing them to chase the market and enter late.
Finally, once you realize that the market is in a strong trend, you don't need a setup to enter. You can enter anytime all day long at the market if you wish with a relatively small stop. The only purpose of a setup is to minimize the risk.
Here are some characteristics that are commonly found in strong trends:
- There is a big gap opening on the day.
- There are trending highs and lows (swings).
- Most of the bars are trend bars in the direction of the trend.
- There is very little overlap of the bodies of consecutive bars. For example, in a bull spike, many bars have ...