Talking about trends Part 2

If you have not read Part 1, I'd strongly suggest to read part 1 (click here), is this is a continuation of the first part.

We have already established that the financial markets are fractal by nature. Now let is elaborate on this by looking at some live charts.

EUR vs JPY m5

This is the 5 minute chart of EUR vs JPY. We have a shift of trend on on this timeframe. Prevoiusly price was making higher highs and higher lows and all the sudden price broke the previous low and made a strong move down. Some may say this is a down trend. Let's have a look at the 1 minute chart.

EUR vs JPY m1

This is the 1 minute chart of EUR vs JPY. We have two timeframes showing a lower low and possibly a lower high.

We already know that we cannot really talk about trends without specifying the timeframe. The assumption of a bearish trend in development may be true on the lower timeframes seen above. But what about the higher timeframe such as H4 or Daily?

EUR vs JPY H4

This is the H4 chart of EUR vs JPY. What we thought might be a trend on H4 may only be a reaction on the higher timeframe. 

EUR vs JPY D1

This is the daily chart of EUR vs JPY. Price is making higher highs and higher lows.

While we assume a bearish trend on the smaller timeframe, the higher timeframe shows us a bullish trend. Some traders who were lucky to take the trade from lower prices might have gotten out because they got scared by looking at the smaller timeframes. This is not wrong. This is one way to manage the trade. It is one form of risk- and money management (clicke here for more about risk- and money management). 

The trend on the daily did not get invalidated, so I must assume the trend continues. And I can keep my position open and still keep an eye for warning signs on a smaller timeframe such as H4. The story is told on H4, that's why I maintain a part of my position. And now I am scratching on a new aspect that I want to talk about in "Talking a little bit about risk management". (If you have not read my article "Talking a little bit about risk management part 1" click here).

I hope you enjoy reading my articles. If you have any questions of would like to give me feedback, please leave them in the comments section below.

Happy trading,

Oezy