Monday 5th December 2011

One of the problems with defining a trend through the use of moving averages is the fact that it's hard to define a sideways trend. Whether using the slope of a single moving average, or a cross involving multiple averages, they really only clearly define an up or down trend.

Markets do move sideways, such as occurred with today's Crude Oil market (well for the first couple of hours anyway, at the time of this post).

Swing high/low definitions allow not only uptrend and downtrend, but also sideways trend definitions. This is part of the reason I prefer to use this type of trend definition.

While it may appear to the newer trader to be more complex, it really doesn't take long to learn to see them. Just a bit of practice, and you'll see the appropriate levels jumping out of the charts at you.

So, if you're using a trend definition that does not allow for sideways trends, ask yourself whether or not you may benefit from changing or expanding your definition.

You can see how I do it in Section 3.2.4 of YTC Price Action Trader.

Although the sideways trend was suspected much earlier, it was confirmed at the close of price bar A, defining a sideways trend between the lower range support and upper range resistance.

This allows us to avoid any temptation for entry via "trend" type setups, sticking more to those that are suitable within a sideways market (tests and breakout failures at the edges, and intra-range trades around key structural features such as minor S/R or traps, if we're more adventurous).