Another less popular method of identifying the trend is through the use of the pivot point.  A pivot point is a level that is considered to be of importance and is used by many technical traders.  A pivot point is calculated as an average of the high, low, close from the previous timeframe of the market.  If price is trading above the pivot point, it is considered bullish, whereas below is considered bearish.

An example of a bullish market can be seen below.

With price above the pivot point, the market is considered bullish.  During these times a trader would be looking to buy or go long.  It should also be clear in the above image of how precise and exact the pivot point was in offering an area of support which resulted in price bouncing and continuing up.  The below example shows an example of a bearish market.

Once again, with price below the pivot point a trader should only be looking to short or sell into the market.  The above image shows price reacting in a similar way each time it approach the pivot point.  First it offered support until price broke through then it offered resistance.

The use of the pivot point for trend identification isn’t as powerful as other methods like price action.  Like any method or tools, this method of trend identification has it’s weaknesses.

The above image shows price moving up and down through the pivot point all within the same time frame.  For this reason it is strongly advised that other confirming factors be used in conjunction with the pivot point.  This may include price action or trading indicators.

The relative strength indicator (RSI) is a momentum based indicator.  However, this indicator can still be used to identify the trend of any market by using the middle 50 line.

RSI can be used to identify the trend of a market by it’s relation to the middle 50 line.  When the RSI is above the middle line the trend can be considered up.  When RSI is below the 50 line the trend can be considered down.

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The image above shows the RSI indicator plotted on the EUR/USD.  As RSI crossed over the 50 line, there is a clear up trend visible on the chart.  While the RSI remains above this 50 line, the trend can be considered up and you would ideally be looking to go long.

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The image above shows a clear down trend in the market, again for the EUR/USD.  During this time, RSI remained below the 50 line.  With RSI below 50, the trend is considered down and this down trend was confirmed with price moving sharply down.

While RSI can be used to identify the trend, it would be strongly advised to use caution and confirm the trend using a variety of other tools such as price action.

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You may notice that the position of RSI in relation to the 50 line does not always confirm a clear trend, or that price may be moving in the opposite direction.  This can be seen in the above image and is the reason why other factors should be used to help identify the trend.

To help and avoid some of the false trend signals generated by RSI, it is recommend that it be used on the 4 hour and higher timeframes only.  The trends in these timeframes are much stronger and you will be able to reduce the amount of false signals.

If trading with indicators isn’t something you like, then the other most commonly used way of identifying a trend is through price action.  The use of price action is one of the oldest and considered by many the most reliable method of identifying trends in any market.

During an uptrend, price will make higher highs and lower lows.  During a downtrend, price will make lower lows and lower highs.  An ideal up trend would look like the following.

It is clear that price is in an up trend.  Each new high is followed by a higher low.  The previous high is then broken by a new higher high.  Likewise, a higher low is made and then price continues on upwards.

Ideal down trends appear as the above image.  As the market moves down, lower lows are made.  Each lower low is followed by a lower high.  The previous low is then broken by a lower low and another lower high.  This continues as the market moves down.

The problem, however, is that markets rarely form as the above two images and up trends and down trends often may not appear smooth as the examples above.  A more realistic up trend may appear as the following:

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The above image shows a more realistic up trend on the EUR/USD.  This up trend could be in any market and this price action is very common.  While not as clear as the previous ideal up trend image, it is clear that price is moving upwards.  However, the main difference is that the higher highs and higher lows are not as obvious.  With a little time you can, however, spot that price has made higher highs, retraced, formed higher lows and then continued on upwards.  Here is a real world example of a down trend.

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Much like the real world up trend example, the down trend varies somewhat from the ideal down trend image.  It is obvious that price is in a down trend and has moved down through the market.  However, once again, the lower lows and lower highs that price made as it moved down are not as clear.  Regardless, you can still see that price has made lower lows, rallied to form a lower high before continuing down.

While using price action to identify the trend is one of the most accurate methods, there are a few problems.  Sometimes price will not move in any clear direction.  A classic example of this is as follows:

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It is clear that in the image above, price is moving more sideways over time than it is trending in any one direction.  Using price action to identify trends is more difficult than using indicators.  However, with enough screen time and patience you will find that price action is much more accurate and reliable for trend identification.

If you are just starting out using price action to identify the trend, be patient.  The more time you spend watching charts the more natural it will be for you to spot the true trend in the market.  Also, avoid using lower time frames to identify the trend.  It is recommended that you apply price action to the  4 hour and higher charts only.

Indicators are used to identify trends in all markets and are an extremely popular way, especially for beginners, to identify trends.  Two common indicators used to identify trends are:

• Moving Averages – The most common moving averages used to identify trends are the 150 day and 200 day simple moving average.
• Relative Strength Indicator – The Relative Strength Indicator is a momentum indicator and is a popular indicator used to identify trends.

Regardless of which trend indicator you use to identify the trend, trend identification is a core component of swing trading and is a crucial step that must be completed before placing any trade.

When it comes to swing trading, the trend is everything.  NEVER trade against the trend.  Before a swing trader places any trades, they should have always made sure that they have identified the trend and are only trading with the flow of the trend and not against it.

Three common methods that swing traders use to check and confirm the trend are:

• Trend Indicators – A popular method of identifying trends is through the use of indicators.  The most popular indicators are moving averages and Relative Strength Index.
• Price Action Trend – For those who prefer to trade without indicators, the use of price action to identify trends is one of the oldest and for many most reliable method to identify trends.
• Pivot Point Trend – Another popular method of identifying major trends is through the use of pivot points.

While there are a wide variety of ways to identify trends, the above three styles are the most common and are a good way for anyone new to swing trading to correctly identify the trend.