A feature of a market turn is that it may not look like a market turn. One does not need to wait a long time to see market turns; they exist on a small scale in Forex on a daily basis. At this level, they can be described as trend beginnings. A definition of a market turn is that it is a new trend but counter to what was the prevailing trend.
On the chart, it can seem like there is an asymmetry between rising and falling trends. In Forex, this may be a product of the relative strength of one of the Forex pairs (or just the appearance of down versus up), but it may also be that falling trends provoke a kind of urgency. Even in a Forex pair, as a market collapses, it provokes a sense of exiting. In some sense, there is a tighter consensus in falling markets that may not otherwise exist, at least at the end. But the end is where the market turn will emerge from, at some point.
So what might a trend beginning look like? It can emerge from low volatility, in effect, the exhaustion of the former trend, perhaps following ranging. There is little enthusiasm for making a deeper trade into that trend but even less enthusiasm for believing that it can reverse. However, when it becomes clearer that this is a region of low volatility, traders may start trendsetting, as it were, by taking positions in the belief that it can change.
Thus, at the very beginning of a trend, volatility can be seen as money flows lift the market, but there is not much to sustain this direction. Volatility begets enthusiasm; it is the first hint of spring, perhaps. One of the more important features of such a move is that it establishes a low, which emerged from the downward move; that is, it creates a past. The new trend is literally remaking the market, ploughing back through former depths, but this time as a new direction. The idea is that this low is not exceeded, so it establishes confidence about the move. With volatility, burgeoning confidence, and money flow, the trend can begin.
This same kind of structure can be seen on longer time frames, where trends can be more influenced by interest rate decisions and data pointing to the health of the economy. So there are factors beyond the market that can weigh down or encourage a trend beginning, reversing a prior trend. There are other reasons, more to do with the market, why trends begin or end, and on smaller time scales, these can be more evident, helping to create trends within trends.
For example, there may be a complex structure contributing to a market turn on the macro scale, especially if macro forces are establishing support or resistance. Underneath, the market may be tracing out patterns within resistance and support, ready to break through when the opportunity presents itself (and also respecting their own logic of value levels). Thus, a market turn may come from the market itself; that is, patterns may allow for a breakthrough, rewriting the macro sense of where the market should be.
The market works to some extent on future valuations; thus, any sense that this can happen can help rewrite the now. However, the logic of the market can work with this, that is, it will try until it cannot. And even if it cannot, maybe it can after a deeper retracement. So turns ultimately happen by surprise, when not expected, except that the expectation was in the market. logic, allowing another route. The converse is that hunting for a turn can end up just going deeper the other way.
Once the market has turned, there can be a different landscape. In Forex, this is seen as structure, as the market pushes valuations in a given direction within the constraints of changing valuation and susceptibility to the sense of going backward, perhaps from news still embedded in the prior landscape (but the economic present or very recent past). As the trend continues, there are still a wide range of reasons for reverses, including that the trend may have gone on far enough for some, for whatever reason.
So retracements (moves against the current direction) are part of the move. This is what helps add structure: the move, then the retracement, but within an overall direction, counter to the previous move.
At a certain point, the end of the trend will start to form. The trend end is the high (or low) point of the trend. What follows is perhaps a collapse and reverse, or a move into ranging and lower volatility. A trend may collapse if it were driven by market logic against the overall macro sense of direction. These are the unlikely moves, which remain unlikely in their outcome. In a convergence of factors, the move may in fact be a continuation of another trend in the same direction, perhaps requiring a retracement or period of low volatility.
At a certain point, the news may converge with the move or the attempted moves, thus setting the time frame within the context of a longer term. This can provide directionality to structure at a lower time frame, creating patterns to trade on. So to some extent, the stability of moves can reflect higher time frames. This can be seen in markets where smaller units can behave in a certain way within the greater whole, depending on the state of the whole. Forex time frames allow perhaps a greater sense of pattern formation, as there is generally not as clear a sense of direction embedded into the whole, so this market may roam free when others do not.
In some sense, the use of Forex as a day trading market means that shorter-term time frames are more important and provide a basis for longer-term moves, even if they are driven by such factors as interest rate differentials (and their sustainability) between Forex pairs. Forex is a complex market, with factors playing against each other; thus, there is an ongoing capacity for retracements and structure as well as intense volatility, which, of course, can be the ingredients of trends.
