Principles of Future Trend Direction

Lets discuss the Principles of Future Trend Direction in this article.

Table of Contents

Having analyzed the past trend direction and identified any signs of strength or weakness within that trend, we now work to determine the likely future trend direction.
Most traders simply operate on the assumption that an existing trend will continue in its current state, until a break of their objective trend definition – “the trend is your friend”.
While that’s generally good advice, as the higher probability is most often for a continuation of the trend, I feel it’s wise to also recognize the true nature of this friendship.
If the trend is your friend then it’s certainly not the nicest one you’ve got; more like one of those friends who will stab you in the back at the first opportunity if you don’t take care.
Signs of strength and weakness within the trend alert us to those times when the trend is not our friend, and higher probabilities are available through counter-trend corrections or reversals.
We assess the likely future trend direction in accordance with the following principles:

These principles are demonstrated below in figures:

Visualizing the Future

Having established our bias for future trend direction, we will shortly be reassessing the bias as the market prints new price bars (or candles).
Will the new data confirm our bias remains intact, or will it provide some new information which alerts us to potential changes within the supply/demand relationship?
In order to make this assessment easier, we should have some expectation of future order-flow.
How do you expect future price action to behave?
This is simply a process of considering the following:
- What price action would validate your assessment of future trend?
- What price action would invalidate your assessment of future trend?
Demonstration of asking these questions is available on above chart examples of 6 principles.

This concludes the article and Module 3 : MARKETS & MARKET ANALYSIS. In next will learn TRADING STRATEGY in Volume 4 so see you there.