Trend trading is one of the most popular strategies in today’s investment world. Investors of all shapes and sizes, from commodities to Asian stocks, are intensifying their price movements by trading in line with market dynamics.
However, trading on a trend is not as easy as buying when stocks rise and sell when they fall. Trend trading is based on key technical indicators to measure strength, perseverance and possibly continue any trends that an investor intends to trade. From the entire set of technical analysis tools, let’s take a look at the main trend indicators that are essential to success.
The moving average is the bread and butter of the trend trader. This simple indicator uses a progressive average price for a given number of days gone by (hours, months, years, etc.). Each point on the moving average line is the average for that day, which provides a smooth view of price movement. There are many popular moving average configurations, but they can be created for any period of time and at any price (close, maximum, minimum, etc.).
Traders use moving averages to determine trends, resistance points and intersections between different moving average lines, among many other methods.
Thadding convergence of moving averages (MACD) is an oscillating indicator that hovers near zero and is a measure of both trend and pulse. MACD calculations follow the same logic as a simple moving average, but include additional functions to give you a better idea of the later moving average compared to the older one.
When the MACD moves to positive territory, this is seen as a signal to buy, and vice versa is in the case of negative territory. Macd is usually used as an addition to other technical indicators and not as a separate indicator when trading on a trend.
Index of Relative Force (RSI)
Relative Force Index or RSI, is an oscillator that tries to measure excessive mood trends. If RSI’s share price reaches 70 out of 100, it is considered a “buyout” and probably needs to be adjusted. On the other hand, an action is considered to be a sell-off when rsi is below 30.
Many trend investors use RSI to capture the last few segments of a strong trend. For example, stocks with a strong trend and RSI 60 will probably have to go through a little more before it stops or opens down. RSI is considered one of the best additional indicators available for trading trends.
Balbalic Volume (OBV)
Volume or OBV balance is an indicator that measures the volume trend for collateral.
Volume is an important additional measure that is used to confirm price trends by determining whether they occur in a large or small number of transactions. As a rule, the large number of trades accompanying the uptrend trend is a supporting signal for this trend, and the same for a small number of transactions with a downward trend.
Best settings are not available because it depends on the type of trend in which the market is located. Now that you know the trend indicators, you will definitely succeed.
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