There are three main chart trends to be aware of: continuations, reversals, and bilateral trends. A continuation trend indicates that the current trend is going to keep on going for a bit. If you are a trend following trader, this is the type of signal you are looking for. In this instance, you are looking for an already established trend that you can jump on and ride for a bit and make some money along the way. Continuation trends are usually indicated by lagging indicators.
A reversal is a signal that breakout traders look for. These indicate that a trend has come to an end, and as such, breakout traders get involved hoping to catch the new trend at the very beginning so that they may maximize their profit potential. Leading indicators work best here, but it should be noted that these are not as accurate as continuation indicators. They are based more on speculation as it is never 100 percent accurate when you are trying to predict the future. A coupling of this strategy with fundamental analysis works best.
Bilateral trends are indecisive at best. The trend may continue or it may reverse, or it might just stay level. Having a strategy in place for any outcome is essential if you are a bilateral trader. It is possible to set entry and exit points in both directions and then execute the trade based upon future data. These protective measures might cost a bit more to enact, but they will protect your trades from unseen events down the road.
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