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Sometimes You Have to Take 3 Steps Backward to Take 5 Steps Forward

Sometimes You Have to Take 3 Steps Backward to Take 5 Steps Forward

Richard Krivo, Trading Instructor

Student’s Question:I just cannot visualize how a downtrend can have uptrends in it or downtrends in an uptrend for that matter. It does not make sense to me.Instructor’s Response:Believe me, you are not alone in that…Have you ever heard the expression, you may have to take 3 steps backwards before you can take 5 steps forward? In the overall scheme of things, following that plan, you will be making forward progress even though at times you will be going backward. This is the same relative premise as downtrends having uptrends in them and vice versa.Take a look at the chart below for a visual

Sometimes_You_Have_to_Take_3_Steps_Backward_to_Take_5_Steps_Forward_body_Chart_5_17_2011.png, Sometimes You Have to Take 3 Steps Backward to Take 5 Steps Forward

The overriding trend on this Daily chart of the USDCHF, for example, is represented by the red downtrend line. Within that trend there are numerous black lines that represent uptrends (moves against the dominant trend) but, nevertheless, the downtrend prevails.This is also an example of why we can oftentimes look at a shorter time frame chart and see a different trend or “look” than we do on a longer time frame chart. Ultimately, it is the longer time frame chart that represents the direction that will provide trades with a greater probability of success.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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