EMA, The correct way of usage - Part 4 - minor structure_2
To confirm a minor trend, we need to see a Strong Break of Structure (BoS) with the body of a candle, in the direction of the trend. This means in the ARZ Trading System, shadows do not count as breakouts for confirming a trend continuation. let's elaborate on the concept: - after receiving pullback from 13&20EMA in A, the previous low has been broken strongly and made a stBoS. This confirms we are in a minor downtrend. So, from now on we are looking to go short any chance we get. - in B & C we are looking for a reason to sell. but weak BoS after will make us cautious and at #1 we are analyzing and not trading until the direction of the minor trend gets clear. - the strong bullish candle after #1 tells us we are indeed in a ranging market! Not an uptrend. Please note that: the minor uptrend should be confirmed. - in D we see buyers are weak, and at #2 it confirms that a minor uptrend is not going to happen. Now wait for a confirmation of a minor downtrend. - stBoS after E confirms we are in a minor downtrend, so we look for opportunities to sell after F, G, H, & I. - at #3 we are officially in a range again. So, we trade as a ranging market, until J tells us we have to trade downward. - a wBoS after K warns us, and we see the price reversed upward. Weak continuation downward at #4 & #5 confirms it. - the stBoS upward after #5 tells us we are in an uptrend, but a weak pullback up until 6 tells us the uptrend might be done. - Then, there is a stBoS downward after L. So, until it breaks upward and has a strong BoS in that direction, the price could continue declining.
Keynote: Short-term traders must always trade in the direction of the minor trend. Unless they are to trade in a ranging market or are medium or long-term traders.
Question: do we have to just use periods 13 & 20 for analyzing short-term trends? Answer: Absolutely not! It's the trader's choice only.
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