How do we identify trend when different time frame contradicts?
This scenario happens very often. On the 1-hour chart, Vegas double tunnel system tells you that the market is on a downward trend, but on the 2-hour chart it is an upward trend and 4-hour chart shows ranging market. . . When faced with this situation, many traders are confused. We must understand that the trend of the market must be linked to the time frame. Never think of market direction outside the context of time frame. A lot of trader can define a trend well but do not understand the relationship of trend and time frame. After understanding this idea, you can know exactly whether the market is moving in an effective uptrend or downtrend in the current timeframe.
So, what traders need is a complete set of logic to define market trends. Here we compiled a complete and clear logic diagram. It can help us quickly and effectively judge current market trends. Having mastered this set of trend logic, you can know in no time the current direction of the market.
Let’s take the H1 chart for Gold and apply the above logic chart to identify current market trend.
Using the Vegas double tunnel system, we can clearly see that gold is in a downtrend in H1 chart. (Tunnel 1 is below Tunnel 2, distance between two tunnels are widened, and the slope of tunnels increases) After identifying the current time frame trend, we will look at the higher timeframe.
On the H2 chart, gold is still showing a downwards trend. There, the trend of both time frames are the same.
The next step is to check whether the candlestick pattern of current timeframe is consistent with one-level higher time frame. Patterns here refers to chart patterns that indicates direction (2B patterns, double top/ double bottom patterns, fibonacci support and resistance, etc.) In this example, we will use trend line to determine the direction of chart patterns.
From the figure above, we can see that the chart patterns of both timeframes are downward. In the H1 chart, the price fell rapidly after breaking the support, and ranging around 1800. It is possible to break out of the bearish flag pattern. In the two-hour chart, you can see that a descending triangle that has been broken, and the downtrend line has not yet been broken.
Through this process, we can identify current trends in a more systematic way. Taking the above example, gold has a downward trend in a 1-hour time frame, so we will look for short trading opportunities.
But if you find in that higher timeframe contradicts, this means that the trend of the current timeframe is not effective. You are advised to switch to other timeframe to find effective trend opportunities.
(Examples of contradictory trend timeframe: gold double tunnel trend system H4 falls, H8 rises, H4 chart pattern falls, H8 chart pattern falls.)