In today forex faq, we are going through a question on how to identify the exhaustion of a trend and how to trade this exhaustion.
Below is the question:
How to identify trend exhaustion & what is the best possible way to trade trend exhaustion based on multiple time frame.
As for your first question on identifying of trend exhaustion, I believe that I have written a blog post some time back discussing on this matter. Below is the link to the blog post so that you can find out more.
As for how to trade the exhaustion based on multiple time frame, maybe you can do it using the top down analysis method. For example when you look at the hourly chart and found something that resembles the exhaution of an up trend.
What you can do is to move down to the lower time frame like the 15 minutes or 5 minutes chart and search for opportunity to enter a SHORT trade.
Please do not enter a SHORT trade immediately after you see patterns that resembles an exhaustion of a trend. The whole purpose of identifying this exhaustion is to give you a Go to enter a SHORT trade using any strategy you have on hand.
If you do not have any strategy on hand, identifying an exhaustion of trend means nothing to you. Enter a SHORT trade without a plan will only leads you to losses when the price retraces.
For example, if you are a scalper, you will only enter SHORT trades. If you are a breakout trader, you will only enter trades that breaks downward. This will increase your chance of entering a winning trade.
I hope that I have answered your question and do feel free to give your comment below as it will be very helpful for other traders here in this community.