Now let’s dig even deeper into a trending market.
A trend (up or down) can be strong with strong runs and weak retracements.
A trend can also be slow and steady, not real strength but still making higher highs or lower lows. This type of trend has retracements that can be deeper yet holding its course.
What are higher highs and higher lows – this happens in a trending up market. This is when the last pivot on the upside is higher than the pivot before it. And the last pivot on the bottom is higher than the last low.
What are lower lows and lower highs – this happens in a trending down market. This is when the last pivot on the bottom is lower than the previous one. And the last pivot on the other side.
Momentum helps us understand the strength. If it’s strong, chances are when there will be slow downs (retracements) it will continue in the same direction. Keeping the momentum going.
Important to note, with slower trends and weaker momentum, the probabilities are much higher for a change in direction. We need to be vigilant of this.
Trending market can also go sideways. You won’t always have a trend going up or down, there will be times when it will go sideways, also known as a channel, or a consolidation. This has no momentum.
Momentum is when you are picking up speed and flowing in a certain direction.