How to determine a Top / Bottom with a Trend with iMTF™ easily!

How to determine a Top / Bottom with a Trend with iMTF™ easily!   A lot of traders “love” to determine when a top or bottom has been established for a particular instrument after it has been trending for awhile.   Why?  Trader’s love to be right.   This is a emotion and emotions are allowed into trading, it can cause the biggest disasters.    At the top/bottom, you have to be very careful because there is usually a lot of volatility at this level.   This is because the buyers and sellers are battling it out!

With the iMTF™ Indicator, the emotions are taken out and you can visually see when a top/bottom has been created.

Here are some basic rules, we are going to use to help with the iMTF™ concept.  They are as follows:

  • Look at higher time frame i.e. Daily/Weekly/Monthly for the top/bottom.    If these time frames are influenced then it will have a high probability of being long term compared to short term.
  • For a bottom, you look for supports to go higher.
  • For a top, you look for resistances to go lower

Let’s look at a example to illustrate how to recognize a top/bottom.   Below is the monthly chart for the $EURUSD spot $currency.

From the chart, you can see the bearish trend and then a consolidation pattern at the bottom.   Now, we are going to zoom into the current bar so we can get a closer look to see what is happening and why we have a high probability of a bottom.

There are two iMTF™ Support/Resistances.   One is a purple dot which represents the Day/Swing Support/Resistances.   The second is a black cross which is the Swing/Long Support/Resistances. Since we are looking at a monthly chart, we will be look at the black cross only.

Here are the steps you are looking for in order to have a high probability of a bottom.

  1.   Wait for a black cross to be established as a support after a major trend.    This has been designated by the blue arrow.
  2. Wait for the black cross to go up after #1.   This occurred two bars after the blue arrow.  This indicates that the supports are increasing.
  3. Look for a confirmation.   The confirmation can be in different forms.    Normally, you look for a  bullish strategy on time frame 30m or above.

If you using Ichimoku, we wait for a close above the monthly green line (KIjun Sen).  Below is the currently monthly chart with Ichimoku.

At the end of the month, the bar will close and confirm it has closed above the green line.   If this occurs then it indicates that the EURUSD bottom has a high probability.     Why did we wait for a close above the green line.   It is a conservative view.   By waiting for that confirmation, the lower time frame are no longer bearish and helps setup a situation of a multiple time frame buy scenerio.

 

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About the Author Manesh Patel