Rotation & Trend

In his recent NinjaTrader Ecosystem webinar, Price Action: Setup and Tips, Trader Dale said that “probably the most important thing about trading price action and reading clean charts is to be able to distinguish a rotation and a trend”. He explained that, if you look at any chart, it will consist of some combination of those two elements. Being able to look at a chart and quickly understand what you are seeing is a foundational element of consistent price action trading.

Trader Dale also stressed the importance of rotation zones. This is where the market moves sideways without any significant change in price, as “liquidity zones” where large amounts of volume are accumulated. Large trading institutions with immense amounts of capital use these rotation zones to slowly enter their money into the market. In other words, they are quietly accumulating their trading positions.

There is a specific strategy behind using rotation zones in this way. If large trading institutions create a trend following the rotation zone, all of their accumulated positions become profitable. According to Trader Dale, this is one reason why rotation zones are “always followed by a trend”. Don’t expect the market to be constantly trending, though. Trader Dale said that the market will be in a rotation zone as much as 70-80% of the time.

Crucially, you can also use these rotation zones as potential support and resistance for the trend that follows. This is because of the high volume levels found in that rotation zone. Using a volume profile indicator helps you easily see where the heaviest volume is found.

In this short clip, Trader Dale explains the interactions between rotation, trends and volume profile in greater detail.

If you are interested in learning more about price action trading, be sure to check out Trader Dale’s full webinar, available free from the NinjaTrader Ecosystem. You can also browse a full library of free, on-demand webinars or register to attend upcoming events live!