Trend-following indicators
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Thread: Trend-following indicators

  1. #1

    Trend-following indicators

    Trend-following indicators, or trending indicators help trader to analyse main tendency in the market and direction of the trend either rising or falling. Market exists in 3 basic conditions: bullish trend, bearish trend and flat.

    Bullish trend is indicated when price moves from lower left corner to upper right.

    Bearish trend occurs when price moves from upper left corner to lower right.

    Those terms are derivatives of «bulls » and «bears» - buyers and sellers in trading slang.

    Flat occurs when price goes sideways in horizontal channel.

    Let’s describe Moving Average (MA)

    Most traders think that MA is «lagging indicator». It’s not absolutely true because this indicator filters data for a given period (you can set it in parameters of indicator). For example, if parameter of MA is 2 and it’s calculated using «close» price, it means that it will take into consideration 2 last candles’ closing prices.

    Example is on the Picture â„– 1:

    We see from this chart that this indicator follows average closing price of 2 periods.

    Of course, such information is not very useful.

    Indicator with very small parameter will often change its direction that will confuse trader in his analysis. Its recommended to set more solid parameter, in this case information will be more reliable. But the bigger parameter we set, the more «lagging» indicator we get.
    On the next chart (Picture â„– 2) you see MA with parameter 14, using closing prices for calculation.

    Charts above show indicators with calculation method called «simple». You can see how to set it up on picture № 3.

    Calculation formula for Simlple moving average:

    Simple = SUM (CLOSE (i), N) / N
    • where SUM — sum of parameters;
    • CLOSE (i) — closing price;
    • N — number of candles calculated.

    Therefore, calculation of indicator from Picture â„– 3 is made this way:

    Simple = SUM (CLOSE (i), 14) / 14

  2. #2
    There are also other methods of MA calculation – using open, minimum, maximum prices. Formulas of calculation also vary upon selected method.In trading, MAs are used in many ways, recommended parameter for averaging data is 10 or higher. In Picture 4, you see chart daily EURUSD chart with moving average. We see that MA line was violated and downtrend continued. After breakout to the upside, rising trend began. Notice that price was violating this line but was unable to hold achieved levels. Impulse was too weak to reverse long-term term, we’ve seen just local correctional movements. For trader, it’s important to distinguish main trend and correctional trend.Main trend can be broken but it doesn’t necessarily mean reversal – price can go sideways after that (flat)

    picture â„–4

    Trend-following indicators are designed for identifying direction of existing trend for a given time period. But they are useless if market goes sideways (flat). While trading is range bound market, it’s more reliable to use other indicators – for example, oscillators. Choosing parameter of indicator, trader should define what duration of the trend he is interested in and how long he is going to be in a trade. The greater parameter is, the less frequent reversal signals are. It’s recommended to use trend-following indicators for long or medium term trading.

  3. #3
    wow thank you I have tried using the moving average, the moving average was good for an indicator to me because she is very simple and very easy to read, is the establishment of this indicator after the candle is formed, but we analyze the proper order can be placed properly for the analysis of the maximum.

  4. #4
    I have another strategy and indicator to know the trend and can know when I can enter the market and when I quit it and close the trade but it is a good way to know the trend and I will try this indicator in the demo account in the first but I think it is a successful

  5. #5
    You can trade in trend line and can earn a healthy amount of money. First draw a trend line and use RSI indicator, when SI reach 70/80 and candle reach in the resistance then take a sell entry, and if RSI 30-20 and candle in supporting point then take a buy entry. if tread line in down trend it s more useful t take a sell and if trend is up then take buy action.

  6. #6
    Using Moving Average indicators are surely a great way to know the trend. Even I, myself use the MA's to identify true trend especially when i am using breakout strategies as it helps me a lot to filter out between good and bad trades too. And also in a kind helps me to find out the stop loss and take profits.

  7. #7
    Quote Originally Posted by taharoyal52 View Post
    Using Moving Average indicators are surely a great way to know the trend. Even I, myself use the MA's to identify true trend especially when i am using breakout strategies as it helps me a lot to filter out between good and bad trades too. And also in a kind helps me to find out the stop loss and take profits.
    Well, to tell you the truth, moving averages won't help you to know anything about the trend at all. it's just so that you know how much the market will move in a pair in one day. so that you have a calculation about your own target or when you should close the loss.

  8. #8
    moving average i think is the best indicator and this indicator is always in my chart , but i think this line also should have specific condition because you may use it from 1 to more 100 .. but personally i prefer to use from 20 to 30 and special 25 moving average and i see in many time how the trend is respect that line ...

  9. #9
    Join Date
    Aug 2013
    State Himachal Pradesh
    Yeah you are saying right you can use moving average and RSI too there both are very good indicators for following the trend as we know that trend is our friend in the market so moving average one of the best indicators in that case I also use moving average and always show a great result

  10. #10
    Join Date
    Sep 2013
    The seeing is believing, it is really a trend and the reverse trend trading way out kind of indicator that is usually seen on the mt4 trading platform if you have just loaded the trading platform on the computer, with this, i believes that it might be one of the best, but the principles of usage and the way that i is is too simple, that is why i did not gave it a shot before. Doing this with the trading system that is about trending too might be a good idea to me.

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