Finding the trend direction
This is the 1st lesson of the 79% Pullback Trading Strategy course.
The 79 Pullback strategy can be used on any time frame, any chart but we will show you how to use it as a swing trading strategy taking signals from the 4 hour chart. It can be used as a trend trading or a counter-trend trading methodology however it is always advisable to trade with the trend when starting out.
To define the trend we will look at the daily chart with the fractals indicator added to it.
Fractals are widely used to mark reversal points in the markets. An up fractal is formed when the highest candle has two candles to the right of it with two lower highs and at least two candles to the left of it with two further lower highs.
On the flip side: a down fractal is formed when the lowest candle has two candles to the right with higher lows and and two candles to left with two further higher lows. Make sure you always wait for the second candle to close after the fractal has formed because if price moves above or below the higher high or the lower low, the fractal will be removed by your charting software.
An uptrend is established if the price moves above the most recent up fractal whereas a down trend is confirmed if price moves below the most recent down fractal. Remember, it is enough for the price to move beyond the fractal, it does not necessarily need to close higher (in case of an uptrend) or lower (in case of a down trend) than the middle candle's wick where the fractal has formed.