If you have any questions or suggestions you are welcome to join our forum discussion about Trend Continuation Factor Indicator. Join The Forum Developed by M. Pee, the Trend Continuation Factor aims to help traders identify whether the market is trending, and, in case it is, in what direction it is headed. In many cases, it is the ultimate trend indicator. After all, the trend may be your friend, but it sure helps to know who your friends are. In this article, we'll examine the value of ADX as a.
Trend Continuation Factor
This lesson will cover the following
- Definition
- Interpretation
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Developed by M. H. Pee, the Trend Continuation Factor aims to help traders identify whether the market is trending, and, in case it is, in what direction it is headed. It can be used in any time frame, with every currency pair and is suitable for beginner traders.
The indicator is comprised of two lines, namely the PlusTCF and MinusTCF, which separately correspond to bullish and bearish momentum, respectively.
If the PlusTCF line is positive, then the prevailing trend is bullish, while a positive MinusTCF line signifies a bearish trend. Logically, both lines cannot be positive at the same time because the market cannot be in a bullish and a bearish trend simultaneously. However, they both can be negative at a current moment, implying that the market has consolidated in a trading range. Here is how the indicator is displayed in a trading platform.
Chart source: VT Trader
As for trading this indicator, it is generally interpreted and acted upon in a similar way as trading the Average Directional Movement Index. The most basic trading strategy involving the TCF is to enter long positions when the PlusTCF line is positive and to enter short positions when the MinusTCF is positive.
Traders also tend to regard the crossovers of the PlusTCF and MinusTCF lines as entry signals in the direction of the advancing line. Thus, if the PlusTCF crosses the MinusTCF and becomes positive, you should initiate a long entry, and vice versa.
Apart from the two trading strategies listed above, more experienced traders can incorporate the Trend Continuation Factor in their trading plan by combining it with other indicators. As a reference point you can use a number of trading strategies we have previously discussed in our “Forex Trading Strategies” guide. More particularly, you can look up strategies based on ADX (Average Directional Movement Index), as well as the combination between ADX and Parabolic SAR. Generally, replacing the ADX with the Trend Continuation Factor should should yield results comparable to the original strategy.
If you have any questions or suggestions you are welcome to join our forum discussion about Trend Continuation Factor Indicator.
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Trend Strength Indicator
It's natural for traders to want to know when a trend has changed. A trend change is often associated with a new opportunity and a chance to be on the ground floor of a big move. However, the answer is one of the more elusive ones in the world of FX trading because the trend change is often noticed only after the fact. Today, we will look at different patterns that can help you see when a trend is continuing so that you know when your best bet is to stay in the direction of the larger trend or if a trend is reversing.
Remember, a reversal type pattern is a statistically rare event and should not be your base scenario when analyzing charts.
Popular Patterns to Be Covered
When looking at price patterns, you can often find patterns that begin with only a handful of candles. On the other of the continuum, you can find patterns that span out over days, weeks, or months. The shorter-term patterns that only involve a few candles are most commonly associated with price action analysis or Japanese candlesticks. For a definitive guide on Japanese candlesticks, check out Steve Neeson's Japanese candlestick charting method.
Continuation
Continuation patterns are the bread and butter of many discretionary trend traders. The necessary ingredients for recognizing and treating these patterns is a mix of knowledge and patience.
Japanese Candlesticks
Japanese candlesticks can be used alone but their effectiveness enhances greatly when you combine them with a tool like a moving average or a trend line. We will show you what methodologies you can add to Japanese candlesticks to increase their effectiveness in continuation patterns.
Triangles
Triangle patterns are frustrating in the act but very hopeful for traders after they've already occurred. We'll discuss what types of triangles you may run into as well as how to trade them and the common pitfalls many traders fall into when coming upon triangles.
Sideways Consolidation
A sideways consolidation sounds simple and clean but that's not always the case. There are often times where a new high or the prior price range extreme is exceeded only to see a new relative low develop a few short days after. For this reason, these should be combined with the prior articles on price range extremes to find when they have expired and when a trading opportunity is present.
Flag
Flag patterns are very popular and very easy to recognize in trade. We will discuss wherein a trend a flight pattern often develops and what the pattern often indicates about crowd psychology in the markets.
Reversal
it would be difficult to mention enough times that reversal patterns are statistically rare and should not be the base case scenario when you see one developing on the charts.
Head and Shoulders
A head and shoulders pattern is one of the first chart patterns that many traders learn. You'll learn not only their namesakes but what the pattern implies. In my experience, the reversal is rarely as significant as many traders expect or hope.
Reversal
Similar to continuation Japanese candlestick patterns, the reversal candlestick patterns can be very helpful in their effectiveness can be increased with the use of other tools. You will be introduced to the tools and the reversal patterns worth trading.
Double Top
Similar to the head and shoulders pattern, a double top is one of the first patterns introduced many traders. There are times when I double top will lead to a more extensive reversal but those events are rare and we will discuss what you should look out for after you believe a double top is taking place.
Confirming the Trend Change
Whenever a reversal pattern is believed to be in play, you should have ways to confirm the trend change. We will use three tools to help us identify and confirm a trend change so that you know when a higher probability reversal is playing out presenting you with an opportunity to trade.
Happy Trading!